In just a few short words, this brief comment captures the primary difference between commodity-backed money (“a specie-backed dollar note” for example), and today’s money (“a fiat-dollar note”) that is simply debt organised into currency.
A specie-backed dollar note is a receipt on unconsumed wealth, on savings. A fiat-dollar note is an IOU on yet-to-be-earned wealth, a debt.
Do you see the problem?
To act as an honest medium of exchange, money must be backed by unconsumed wealth.
[The system of debt-based money] is based on a confusion in thinking; that it creates a state of permanent indebtedness; that it leads to national impoverishment rather than prosperity; that it results in price in[stability]; and that it inevitably leads to bank runs and then to systemic banking crises; and that it unjustly redistributes wealth from the honest and industrious to bankers and their accomplices….
To offer debt as payment for debt is not to settle it, but instead to roll the obligation into the future by replacing the original debt with a new debt. For a debt to be paid off with debt is in truth no settlement at all, only a perpetuation of indebtedness…
[There is, moreover] a moral dimension [to the system] of fractional reserve banking … "a blind scheme by which the first principles of justice and common sense in the employment of capital are reversed." During [each montetary] crisis, property is redistributed in an unjust and arbitrary manner, with bankers generally coming out ahead of their depositors, whose funds they have expropriated. ‘Moreover, a general code of easy morality prevails among debtors in distress as to helping themselves to the property of creditors; cunning and high-handed villainy scramble in the confusion of a financial crisis; opportunity and privilege, such as may be enjoyed by a bank director or bank favorite, enable some men to avail themselves of more than their equal or just share of currency and capital.’
The entire fractional reserve system is …inherently unstable, ‘a mad system of kiting between the banks and their customers — and an enormous superstructure of debt is built thereon, keeping almost every [merchant] in danger of bankruptcy.’
Which explains so much of today’s world, don’t you think?