PositiveMoney

A very good campaigning organization from the UK which tries to educate people about how money really works.

A rough summary of their basic theses :

• Money is created by private banks in the form of loans. Banks do NOT just lend out deposits that people have put with them.

• While there is a lot of criticism of this using the term FractionalReserveBanking, in fact, various deregulations in the UK (and maybe elsewhere) mean that there is no effective fractional reserve which limits how many of these loans banks can make. (There is a limit, but it's on the banks being able to clear their debts with each other overnight. So effectively, as long as the banks act in concert they can create as much DebtMoney as they can find takers for.

• Banks have increasingly switched to a retail model, ie. making loans directly to the public rather than other businesses. This has been partly driven by a new "sales" culture which includes bonuses for those who convince the most people to take out loans.

• Banks prefer to make loans which are backed by assets rather than loans which are riskier (ie. more likely to default)

• The two previous points together mean that banks prefer to lend in the form mortgages against property than to, say, small businesses. A relatively small proportion of the money they lend has been investment in business and a large proportion has gone into property.

• This has been one of the drivers of the housing-bubble / speculation that led to the 2008Crash.

• The fact that banks make profits from interest repayments on loans of money they never had in the first place is one of the major forces redistributing wealth upwards, from ordinary money-users to be concentrated in the hands of the financial sector.