In fact, around 97% of all the money that exists is created in this way, out of nothing, when banks make loans. Every loan they make creates brand new money in the economy, whether it’s a personal loan, car finance or a mortgage. Now, here’s the problem. If almost all the money we use is created by banks when they make loans, then for every pound of money, there has to be a pound of debt. If we want more money in the economy, we have to go further into debt to the banks, because more borrowing from banks means more new money is created. But the process happens in reverse when we repay loans; when we pay down our debts, the money effectively disappears. This makes it impossible for all of us to reduce our debts. If we start paying it off, then the amount of money in the economy shrinks.
Less money in the economy means less spending, and less spending means fewer jobs. So there’s the choice: we can have either more money…and more debt… Or we can have less debt and…less money. When the only way to get money into the economy is to borrow it from the banks that create it, then we’ll always be trapped under a mountain of debt. But it doesn’t have to be this way. If we took the power to create money away from banks, and instead have money created by a public institution that isn’t chasing short-term profits, …then this new money, as it supports jobs and the economy, could be used to pay down the debt… …and we could finally start to clear this mountain.
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As found on Youtube
https://goo.gl/NEhCik