Debt- A Modern Money Theory

Money started out to be pieces of gold that were hard to find and carry.

Then it was improved by being represented by pieces of paper.

Occasionally people lost confidence in paper money and occasionally nations needed more money than there was gold to back it up.

Money was greatly improved when nations freed their money from the constraints of gold and printed it from “thin air”.

The banks could now lend as much money as was needed to keep the economy running and growing. People took advantage of this lending frenzy and accumulated debt. Many felt that a debt based economy was a form of enslavement that replaced chains and whips. Fortunately, it is possible to be free from this enslavement.

Those who fearfully believe that debt enslaves, save more and spend less. They save for a "rainy day." The less they spend, the less they contribute to the economy.

Those who fearlessly believe in their freedom and embrace debt as a liberator borrow as much money as they can. They power the flow of money and keep the economy moving.

The more successful were the ones deepest in debt. They used their loans to provide products and services and jobs for the smaller businesses. Both big and small businesses provided workers with money to spend on products and services to keep the economy running.

When the economy is stalled because of war or a pandemic outbreak, to get the economy flowing again, money has to be created.

This infusion of new money ironically drains the savings of those who fearfully chose to save their money for a rainy day. The savers end up living up to their name and save the economy by bailing out the spenders. New money is pushed to those with the strongest chance of recovering, so that they could start the flow of money and get the economy running. 

The latest monetary theory of economist called Modern Money Theory (MMT) claims that as long as a nation has its own sovereign money, it can never go bankrupt as it never has to borrow money. It can create money from "thin air". Other monetary theories have governments first borrow money from the nation before they spend it. They set interest rates to control inflation and collect taxes to pay off the debts. MMT on the other hand works opposite to this. Governments set interest rates to determine how much money to create to ensure full employment. They collects taxes to control inflation.

The government creates as much money as needed to keep a healthy economy running. The money, created out of "thin air" is given out as loans to the private sector. It is also used for military, work guarantee programs, infrastructure, health care, education, unemployment and welfare. Taxes are collected to control inflation ensuring any excess money is flushed from the economy.

With close to zero interest rates, creation of money “from thin” air, and bail outs of the “too big to fail”, our leaders seem to follow some wise advice written in some books of wisdom claiming that banks should not charge interest, and that debt should be forgiven.

The important thing is to get the economy running. 

When governments go bankrupt, they bail themselves out by creating money. When citizens go bankrupt, they lose their small business and their homes and become tenants dependent on their landlords and bosses.


In communism and socialism, the government controls the corporations. The corporations determine the supply and influence the demand. The citizens on the bottom are left dependent on the government and end up trading freedoms for security willingly or unwillingly.

In capitalism, the corporations control the government by controlling the politicians. The corporations determine the supply and influence the demand. The citizens on the bottom are left dependent on the corporations who offer them freedoms of consumerism. These freedoms are targeted and valued by adults who willingly take risks to get ahead in life. The children and elderly on the other hand have little freedoms and value their security more.

Communism, socialism or capitalism put the people, the citizens on the bottom. In a just world, they should be on the top controlling the government and determining demand that influence the corporations to supply.

Money makes the world turn round and as long as there is money, there will be money stores called banks that supply the world with it. In the beginning were kings that issued gold pieces as money. Then came entrepreneurs that managed money of kings and showed that controlling money gave them great powers and riches. Some people realized that by controlling money of people gave them great prestige and power. Many money stores opened and printed notes called money that was backed by gold. When they cheated and printed more money than they had gold, they became bankrupt. The most powerful and biggest banks formed a group called the central bank to protect people effected by bankrupt banks. When the central bank became bankrupt, they decided that backing their money with gold was not such a good idea and created money out of "thin air" called fiat money. With fiat money, as much of it as is needed could be created without having to have any gold to back it up.

The role of the central bank was to ensure that there was always enough money to fulfill the requirements of the government to provide services and the commercial banks to make loans and have money flow in the economy. The commercial banks made money by lending out money to people to provide a product or service which would attract more money and ensure that the money would be paid back with interest. The commercial bank returned the money to the central bank and kept the interest as profit. If too many people were not able to repay their loans, the commercial bank could not repay the central bank and would become bankrupt.

The central bank also set interest rates to regulate how much money the commercial banks lent out. The lower the interest rates were, the more people applied for loans. The more collateral a person had, the more likely he was to get the loan. Loans for houses are easier to get than loans for small businesses, despite that small businesses generated more productivity. Issuing money to productive sectors caused money to flow so that there is too much money and demand chasing the supply and causing prices to increase as seen in inflation. Issuing money to non productive sectors slows the flow of money so that too little money chase too many product causing prices to fall as seen in recessions.

People who do not trust fiat money or the banks that create it can hoard gold.



People who are unwilling to support gold miners who damage and pollute the environment can instead support Bitcoin miners using cryptography and the internet to mine “digital gold” that could be also used as “digital cash.”

Bitcoin offers all the benefits of gold without any of its disadvantages and an ease of use for anonymous payments on the internet.

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