If people knew how money is created

There'd be a revolution tomorrow morning

I can remember clearly when I stopped believing the TV. It was when I found out how money is created.

True story.

I’d watched Alah Kohler just about every night of my life growing up. He’d turn up just before the weather and the sport, and tell the couch-bound Australian public why gold was up or oil was down or stocks were mixed because reasons. He seemed so sure he knew why.

He had no idea. Not a clue. He just made it all up. And if you listen to or watch the establishment media, they’re still doing it. Every single day.

“Oil closed lower overnight on fears of OPEC failing to reach an agreement on cutting production in the near term due to…”

Bollocks.

They don’t know that. No-one does. There’s never a single cause and effect for anything, let alone something as complex as the spot price for West Texas Crude.

The best traders in the world have no idea why markets go up, down or sideways. They just trade the probabilities and try to minimise losses. Their job is to be better at guessing than the next guy and sell to him before he figures it out.

Alan just made it all up, and got paid bazillions to do so. And the half of Australia that still watches TV listens to him and other TV heads like him, half-attentive, and afterward are consoled at some deep psychological level that at least, in this crazy and chaotic world, they know why the price of oil went down last night.

They might not know why their son is now keen to become their daughter or why their wife hates their guts, but they know why the price of oil did what it did last night. There is at least some order in the galaxy. They’re informed.

I had an interest in economics growing up and so I watched Alan, and I probably believed him. Then one day, shortly after the Global Financial Crisis, I found out how money is created and the spell was broken. I knew that everything I’d ever been told by TV news was a lie. To quote our orange hero, it was FAKE NEWS!

At school, you’ll have been taught by economics teachers who also watched Alan that the government creates the money we use every day, or if they were a little better informed they’ll have told you the Reserve Bank of Australia does.

Fake news.

The vast majority of currency in the world today was created by private banks when they made loans.

That’s worth bolding, because if you take the time to think about it then everything the Australian public believes about money, finance and economics blows up faster than Lebanon’s economy last year. Or Turkey’s currency.

Or, perhaps, global markets in the next few weeks.

That there is a weekly chart for the S&P500 (a big US stock index) going back to 2008, the time of the aforementioned Global Financial Crisis. If, like me, maths wasn’t your strong suit at school, let me help you interpret it.

It’s gone up. Way up. Like, impossibly up. Even the Chinese COVID terror attack of March 2020 was a blip, before it resumed its upness. And it made a lot of rich people a lot richer. Just like real estate down here in Australia.

Take a close look though at that last bit, right at the end. That’s not up. It’s very steeply down. That was the close last week on our Saturday morning, and it wasn’t just the S&P that looked crashy. Bitcoin, being an asset that never sleeps and trades 24/7, has been clubbed like a baby seal in an igloo all weekend. All Western markets are on the brink of epic drops.

Might they recover on Monday and resume their uppity-up-up-upness? Sure. On Tuesday Alan would have the reason for why they did so, too.

Perhaps, though, this is The Big One. The time pivot when the post-GFC funny-money inflation of assets globally finally turns, and the economic reality that we’ve been avoiding ever since through central bank money printing and reckless government borrowing finally ends.

There are at least several reasons for thinking it might be, and all of them have to do with the central banks.

But first, let’s tease out what debt-based money creation actually means for civilisation on the planet. Like, who cares, right? Who cares about how money is made?

Everybody should care. It determines everything. The entire edifice of post-WWII material society rests upon this system, and it’s a system which will inevitably one day implode in a catastrophe that will rival every collapse in human history.

The consumerism and the carefree liberty and the easy affluence we have taken for granted for an entire human lifetime now was all made possible because we were borrowing against the future. Privately, we’ve been borrowing more and more to buy inflated houses from each other, while governments have been bingeing on debt to expand the welfare state and fund imperial wars in the Middle East.

The public hospital down the road was made possible by debt. As is the public school. So was the new sports centre at the private school. And the shopping centre next door. The rail line connected to it too, although it at least pays some economic dividend by bringing in miserable office workers to their miserable office buildings to send emails, create worksheets and have meetings all day in order to gain the currency they need to pay back the bank for the mortgage.

All of it made possible due to debt, with all of the borrowing coming from international bankers who created the money out of thin air in the first place and who have feasted on the interest for decades.

Money for nothing.

In 2008 the system creaked and groaned and came within a few days of meltdown. Only when Western taxpayers gave trillions of dollars to the Wall St and London banking cartel was the catastrophe postponed.

Ever since, the major central banks of the world have pumped trillions and trillions into the private international banking system to keep it afloat. The numbers keep getting bigger because that’s how debt works in a system sustained by debt-based money creation. The numbers always have to keep getting bigger, or else the music stops and we all realise at once that there were never any chairs.

Not only have central banks created trillions in reserves to prop up the world’s banking cartel. Governments have also opened the debt spigots in order to create more currency and keep the Ponzi scheme going. Our Treasurer Josh Frydenberg even had a Zoom meeting with the heads of Australian banks in March 2020 commanding them to not stop lending in response to the COVID biowarfare attack.

It’s all about keeping the debt growing to keep the money flowing to keep the system going. That’s the real meaning of the term ‘economic growth’. Debt expansion. It’s why the welfare state was allowed. It’s why women were brainwashed into wanting to become wages slaves like men instead of raising the family. It’s why negative gearing was introduced. It’s why interest rates have been dropping for decades.

It’s why China was accepted into the World Trade Organisation in December 2001 despite still being a communist country. New collateral and new borrowers for the debt system. Who cares that they’ll use their wealth and technology to one day bring down the liberal world order? White people are racist anyway. Just pump the debt, baby.

Chicks for free.

It’s why we all know we’ve been working harder and harder for years and we can feel that it buys less and less over time.

Our politicians have spent future Australians’ money like drunk, newly-minted Chinese millionaires in the Crown high-rollers room since 2020. To spend, they borrow from the international bankers. The money will be repaid with interest in the future via taxes. The numbers make your eyeballs bleed if you care about your children’s future.

Which gets us to why this might be the moment that the central bankers finally pull the pin and let this sucker blow. As you’d expect, it centres on events in the northern hemisphere rather than here. The US, Europe and China to be precise.

The Democrats tried to pass a multi-trillion dollar spending bill last year in the US Congress and failed. That’s trillions of new debt which won’t get created to fund transgender workshops in kindergartens and reparations payments to illegal immigrants. At the same time, inflation is spiking due to the COVID-induced collapse in supply chains, and Fed Chair Jerome Powell’s speech last month promising to raise rates in 2022 was the trigger for the recent market jitters.

The last time the US had high inflation was in the late 1970s, and the Fed raised interest rates to 16% to bring it under control. The RBA here did the same ten years later when the Boomers had to pay 17% on their 50K mortgages for a year or two and haven’t stopped talking about it ever since.

If mortgage rates go to half those levels again, every Aussie Airbnb millionaire is going to have sell the Range Rover and start living on lentils for a very, very long time.

While all this is happening in the States, Europe is entering a geopolitical crisis. Tensions with Russia are getting quite serious. This could be the very big pin the global asset superbubble is looking for.

And on top of all those momentous developments, Chinese real estate developer Evergrande has defaulted on US$300 billion worth of loans. Yes, that’s a ‘b’. The amount of private debt in China is seriously cosmic. The high speed rail that the Chinese are so proud of has been built using approximately US$850 billion in debt which will never be repaid. Such gargantuan consumption is how China used more cement between 2011 and 2014 than the US did in the entire twentieth century.

All made possible via debt. That’s likely why Xi Jinping begged the Fed to not raise interest rates during his speech to the 2022 World Economic Forum last week.

Big changes are afoot. Long-established beliefs and the institutions they have underpinned are unravelling. Those same lying business reporters who pretend to know why corn futures rallied overnight are laying the groundwork for the public to accept a new economic system. They’re seeding Bolshevik ideas like a reworked form of the Labour Theory of Value¹ into the public discourse to get the public to accept the weird corporate-communist dystopia they’re desperately trying to bring in to cling on to power and avoid the guillotines and pitchforks they so rightfully deserve.

The central bankers are getting ready to do away with the usurious system of money creation they’ve controlled for centuries and which enabled them, through British then US military power, to establish their system in all the world. Instead they are looking to implement a form of Modern Monetary Theory using Central Bank Digital Currencies. They’re going to do away with government debts by ending the trade in bonds and instead use blockchain technology to send money directly to us consumer serf peasants for us to use in ways that they approve of. They might even throw in a general debt cancellation to make the public think they’re being nice.

It won’t be nice, though. It will be central planning on steroids, using technology and stringent social engineering to ensure the population doesn’t realise they had their futures stolen and that, once they do, they’ll be too dependent on the tokens that get sent to their phones to buy bugmeat burgers and weekly carbon credits to do anything about it.

If only we hadn’t listened to Alan. If only we’d turned off the TV and read The Wizard of Oz, which warned us what usurious money creation would lead to if we let it take hold.

But we didn’t. We had other problems. Like the kids and the wife. As long as our super and house value went up, there was nothing to worry about.

If there was something to worry about it’d be on the news, right?

1. The disproven view that all value in the economy is created by human labour, and therefore all profit is the theft of that value by business owners.