If you look at how the Monetary system works, money is created through debt. When you go to the bank for a loan, they aren't loaning you money from their pot, they are creating it out of thin air and then placing that value into your account. You then have to pay interest back on that loan, so effectively the bank has just made money out of creating money.

 

If all the debt in the world was paid off today then there would not be a single penny circulating the economy; but then this would create another massive amount of debt through the intrerest owed as there is only enough money in the system to pay off the principle amount.

 

Have a look at Culture In Decline....

When I was on holiday in New Zealand I was listening to a radio show about how the Government had rejected an unemployment back to work system (you get benifits for a while but then must get a job or get reduced payments) as they said that for the economy to work efficiently they required about 6 to 8% of the general population to be unemployed that way when a position becomes available the company not only has a healthy bunch of candidates but the position could be filled fast. They said that if everyone was working who would fill the job vacancies. Got to love the New Zealanders.

If you look at how the Monetary system works, money is created through debt. When you go to the bank for a loan, they aren't loaning you money from their pot, they are creating it out of thin air and then placing that value into your account. You then have to pay interest back on that loan, so effectively the bank has just made money out of creating money.

 

If all the debt in the world was paid off today then there would not be a single penny circulating the economy; but then this would create another massive amount of debt through the intrerest owed as there is only enough money in the system to pay off the principle amount.

 

Have a look at Culture In Decline....

 

Your understanding of our monetary system is misguided.

 

Banks hold money in the form of bank deposits (checking accounts) and pay interest (very low amount) on these deposits. Then they loan that money they are holding in the form of deposits. They recieve interest for these loans and make money on the spread.

 

They do not create any actual money. They simply loan out the money stored in checking accounts. This money flows through the economy and ends up in someone else checking account. As a result one dollar deposited into a checking account can be represented in multiple people's checking account ultimately increasing the money supply. To say they loan out money that they created out of thin air is absolutely incorrect!

 

Also, if everyone repaid their debts there would absolutely still be money. It would simply be in the form of physical currency known as M0. In this case M0 would equal M1. If all debts were repaid, the money supply would shrink, but it would not shrink to zero because there is still physical money stored in bank vaults and circulation through the economy.