• How money works

    by  • 23 March, 2008 • General • 1 Comment

    At the end of the year, Fabian left his shop and visited all the people who owed him money. Some had more than they borrowed, but this meant that others had less, since there were only a certain number of coins issued in the first place. Those who had more than they borrowed paid back each 100 plus the extra 5, but still had to borrow again to carry on.

    I read this excellent narrative which explains how money works. Huh? Money needs to work? you’re saying. No, that’s not what I meant. The article gives a fictional explanation of how money came about, explains what goes on in the back rooms of our monetary system, how governments are involved, etc., in a way that even I can understand it.

    Nothing new or revolutionary if you had a basic of economics at school, but still a nice refresher to look at it from a new perspective. It certainly makes you think about the real value of your money. It shows how the bank earns a profit of 42% on every 100 euro (or dollar, pound or yen, insert your own currency here) that you trust them with, while you receive a 3% interest yourself on those 100. Or how the 5% that you’re charged when taking out a loan of 100 can never really be repaid since it never existed in the first place. Amazingly thoughtful stuff.

    And then the story gets really nasty. It explains welfare, taxes, credit, societal effects. My head started to spin. How could we have been so naive? Should we stop this madness? Can we stop this madness?

    When you’re done with that article, you’ll be able to understand that the fact that the economy of the United States of America is going to collapse is just a minor side-effect of the whole money system.

    Maybe it’s time I buy this patch of land in the Cretan mountains and start producing something that has some real value. Like olives, tomatoes, or cucumbers, or something…

    One Response to How money works

    1. Pingback: Your money is worth shit | Cretan Chronicles

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