Ask an economist "What is money?' and the answer will likely be: "A medium of exchange, a measure of wealth, and a storehouse of value." You are not likely to hear that money can measure only by market price. Or that money may be a storehouse of value for individuals, for a society storing no matter how large the numbers stored on a computer drive, they are not going to feed tomorrow's children. You are even less likely to hear that money is a system of power based on accounting games and the world's largest and most profitable con game.
...a System of Power
Modern money is perhaps the most mysterious of human inventions. It is nothing but a number of no substance or intrinsic worth. It has no meaning outside the human mind and nature has no equivalent. Yet in contemporary societies, money determines our access to virtually every essential of life.
Mayer Amschel Rothschild, founder of the Rothschild banking dynasty, once proclaimed, "Permit me to issue and control the money of a nation and I care not who makes its laws."
The decisions of those who control the creation and allocation of money determine the fate of nations and shape the boom and bust cycles of economic life. They determine who among Earth’s people will live in grand opulence in the midst of scarcity who will face death by starvation in the midst of plenty
The system of accounts through which money is created and allocated is the most effective and undemocratic of tyrannies because it controls virtually everything and yet its inner workings are invisible to the public. Base on illusion and accounting slights of hand, the system by its nature largely defies logic and thereby understanding.
...an Accounting Entry
In our current system, at its most basic, money is created from nothing with a simple accounting entry when a bank issues a loan. As economist John Kenneth Galbraith famously observed, the process by which money is created is “so simple it repels the mind.”
When you take out a loan from a bank, the bank opens an account in your name and enters the amount of the loan in its ledger. That becomes a liability on the bank’s accounts, offset by the corresponding asset of your promise to repay with interest. Two simple accounting entries and money magically appears from nowhere. This makes banking a very profitable business and is the key to the ability of the institutions of global finance to rule the world.
Those to whom this system allocates money in abundance may live in grand opulence in the midst of scarcity. Those from whom the system withhelds it may die of starvation in the midst of plenty.
International money flows that involve nothing more than numbers moving from one financial account to another, possibly even on the same computer, can determine the fate of nations and shape the boom and bust cycles of economic life.
...a False Measure of Our Personal Worth
We are taught that money is an objective measure of value. We may say "My time is worth $30 an hour" to refer to the worth of our labor; or "He's worth several million dollars" to refer to a person's financial net worth. Such phrases imply that our personal worth is defined by our financial worth. This unconsciously distorts our sense of our human identity and self-worth.
Another revealing phrase is "I'm making a lot of money" or "I'm not making much money." Rather than speaking of how our work contributes to society, we reduce our labor to the making of money. But of course, unless we are a bank or the Federal Reserve, we are not literall making money. We rarely ask, "Why should I allow money to define my self-worth?
...a Phantom Wealth Illusion
Real wealth has real intrinsic value: land, labor, food, and knowledge are all examples. The most valuable of all forms of wealth are those that are beyond price: love, a healthy happy child, a job that provides a sense of self-worth and contribution, membership in a strong caring community, a healthy, vibrant natural environment, peace.
None of these most valuable forms of real wealth find any place on corporate balance sheets or in our calculations of Gross Domestic Product. Therefore, they rarely receive explicit consideration in most institutional resource allocation decisions. This is why we so often make decisions as a society we believe will make us richer that in fact diminish our real well-being.
Modern societies have come to confuse money, a mere number, with the things of real value that it will buy. The result is a kind of enchantment that leads to accept the illusion that money itself is wealth and that the pursuit of monetary gain at the expense of the health and well-being of people, community, and nature creates real value.
Money created out of nothing unrelated to the creation of anything of corresponding value, is phantom wealth. The details of how Wall Street creates phantom wealth are highly complex. The basics are simple.
...the Perfect Crime
As Wall Street banks borrow from the Fed and each other to inflate the market price of real assets along with the price of related fictitious assets called derivatives. These inflated assets become collateral for more borrowing to further inflate the the phantom wealth assets. If the bubble bursts, as it did in 2008, and the big banks fail, the money stored in their computer memories would disappear and economic activity would stop.
Meanwhile corporations are outsourcing jobs, pushing down wages, and foreclosing on the underwater properties of small borrowers. The bankers become richer as workers, the unemployed, and the disabled fall ever further into debt. Prison and homeless populations grow.
It is a form of theft. Wall Street gets away with it in part because the crucial distinction between phantom wealth and real wealth is rarely discussed and their control of the creation of phantom wealth gives the banker class a nearly unlimited ability to buy the politicians who make the rules that allow bankers to create still more phantom wealth.
Phantom wealth appears or disappears as if by magic as a result of accounting entries and the inflation of asset bubbles unrelated to the creation of anything of real value or utility. The high-tech-stock and housing bubbles are examples.
Those engaged in creating phantom wealth collect handsome “performance” fees for their "services" at each step and walk away with their gains. When the bubble bursts, borrowers default on debts they cannot pay and the debt pyramid collapses, along with the bubble, in a cascade of bankruptcies.
Those who had no part in creating or profiting from the scam are then left to absorb the losses and to honor the claims of the perpetrators of the fraud against the marketable real wealth of the larger society. It is all legal—the perfect crime.