IN AN article at the Clifford Hugh Douglas Institute, Will Waite explains why solutions such as restricting immigration and increasing the manufacturing base, however important they are (I support both), will not prevent ongoing economic decline. That is because creating more jobs will not create more money:

Now we need to hone in on a common misconception that keeps this lunacy in play. Whether you work for a wage or you run a business that makes or sells things you need money to live. So whatever is it you do to get money you call that activity ‘work’. But you should know that money is not made by working it is made by banks lending. The problem everyone is complaining about, is we don’t have enough money to enable the smooth running of the economy. It follows then that there is no point in trying to solve it by doing more work or by selling more things because money is not made by working or selling.

 Forgive me if I point out the obvious but we should be careful about the words we use. If you do some work and are paid for it, you don’t ‘make’ money you simply get it from somebody else. So, as a matter of fact, there is no functional link between work and the quantity of money at all. Making money is the exclusive domain of banks. When banks lend money it is literally made and, ironically it is about the least labour intensive occupation imaginable.

To illustrate the process pretend I work in a bank and this computer I am using is in the bank where I work. I have a customer sitting before me named Sue that the bank I work for has approved for a $100,000 loan. I bring up her account, put the cursor in the correct field, smile over the top of my screen and type

     $100,000.00 (enter after the last zero)

     Money made.

That this is the method by which modern money comes into existence is self-evident. The $100,000 is deposited into Sue’s account and no one will refuse it as payment for goods and services. It is new money. There is no gold backing and no one’s account has been reduced so Sue can have her $100,000. The same principle applies on the national level. Virtually every nation in the world operates from a position of insolvency because the tool they require to conduct their economic affairs is created in this way. The more productive the economy, the more money is required, so the greater the national debt, take the U.S. and Japan for instance. The essential problem the financial system now confronts is that governments, business and private people are so indebted they aren’t borrowing enough to provide economies with sufficient debt money to lubricate economic activity.

 All sorts of devices have sprung into existence for the purpose of increasing the quantity of borrowed money cycling in the economy. Quantitative easing, negative interest rates, credit cards, microloans, unfunded superannuation, finance desks at used car lots, TVs that can be bought on 5-year interest free plans etc. NAB wants to finance my wedding, a holiday in London and a new house and I frequently receive mail from them telling me how much I deserve their latest low interest credit card. Apply within. Douglas warned us that trying to solve our shortage of money problem by loan credit would increasingly mortgage property to the banks. Check the loan books of the financial industry in the country from where you are reading this (if you can) to see if he was right.

 Governments often ask ‘Where is the money going to come from?’ This question is taken to mean ‘whose money are we going to take so we can pay for this or that.’ But it is answerable in a general sense. The answer is that the banks loan it into existence. Instead our attention is diverted into all sorts of blind alleys that will have no bearing on increasing the money supply. One has to wonder whether the diversion is, on some level, deliberate.

 All, and I mean ALL, of the mainstream discussion about our economic problems fails to factor in this vital truth. It is like a magician’s sleight of hand. Everyone, from the blue collars right down to the politician, complains of there not being enough money, yet no one thinks it important enough to examine its source. [emphasis added]

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