What is Money?
We all use money We need it to buy things
We work hard to earn it. We save it for retirement, or a rainy day.
We all rely on money – so why don’t we know how money works?
Why is there sometimes too much of it, making us believe that the good times will never
end? Where did all that money come from?
And why is there suddenly not enough money around? Why are people struggling to pay their
bills? Where did all that money go?
The surprising fact is that most of the money in the UK is created by banks.
Like a magician, banks make the money appear, seemingly out of nothing, whenever they make
loans. But this money is not what it seems. This
money is credit and is temporarily on loan from the banks.
We use it as money. We believe that it is money.
But because it is credit, at some point in the future it has to be paid back.
And when it is paid back it disappears. This is not a trick — this is how almost
all of our money is created and destroyed. So how dependable is this bank created money
that we all rely on? Well, banks make their profits by charging
interest on loans, so as long as they’re confident in the economy, they want to lend as much
as possible. More loans and mortgages means that more money
is created, and before you know it, house prices go through the roof.
But if they make too many loans the debt burden becomes too large, so people can’t afford
to pay them back. So then the banks stop lending, and suddenly
there is not enough money. Businesses go bust, people lose their jobs, and houses are repossessed.
This is what caused the financial crisis. And fundamentally nothing has changed since
then. Money is still conjured up by the banks. And it still disappears when debt is repaid.
Until we change this, we’ll never have a stable economy, safe jobs or affordable housing.
But it doesn’t have to be this way. Positive Money is campaigning to change the way money
is created. And we need you to get involved.