The Credit Crunch

I have been a strong proponent that bank deregulation is at the heart of our current credit issues. While I have always posed the argument that banks deserve a fair level of autonomy, they also need to be watched and controlled very closely.

I ran across a video that talks about how money is created recently. In the video they site a study that maintains that a large majority of Americans have no clue how money is actually created. This is bad.

If you don’t know how money is created, watch the videos. They are a concise overview of how money is created. They bake in a little doom and gloom that, while accurate, isn’t necessarily an immediate problem (although with credit crunches and bubbles it very well could become an immediate problem). They give a whirlwind tour of what is typically spanned over multiple college business courses. Most importantly, you will be more informed of how the current monetary practices and policies affect you and your fellow citizens.

Please keep in mind as you watch this that “feeding the beast”, as they call it, is a ceteris paribus situation. They chose to overlook inflation with this scenario. As the amount of outstanding interest rises the numbers are offset by inflation. For example, $10 in interest today is the same actual dollar amount tomorrow, even if inflation has devalued your money such that the real value of $10 is now actually $20. That is, what cost $10 yesterday now costs $20 for the exact same thing. Without diving down this rabbit hole too deep, just keep in mind that the doom and gloom in the video is not to be taken at face value.

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Jason McDonald

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