The Old Saying: Money Doesn't Grow on Trees:
There's an old saying that "money doesn't grow on trees." and thank goodness for that! Have you ever tried growing a tree? It’s a lot of effort and a full-time job involving sunlight, water, soil, and a whole lot of patience. You spend months nurturing it, only to end up with a leafy giant that serves as a deluxe squirrel condominium. Meanwhile, creating money? Now, that’s a breeze! Forget about green thumbs—let's talk about the magic of a simple keyboard stroke.
The Magical Money Button:
Creating Money Out of Thin Air:Here’s the shocking truth: 97% of the money floating around in our economy is created from debt with just the push of a button. Yes, while you’re outside battling weeds and hoping for a decent apple harvest, a bank employee is indoors, sipping coffee, and casually conjuring up money as if it's a hobby. Imagine a computer that’s like a magical cash cow, mooing out dollars every time someone decides to take out a loan. No fertilizer or watering cans are required—just a keyboard and a few clicks!
See the Bank of England explaining this: https://youtu.be/ziTE32hiWdk
The Art of Banking: Poof, You Have Money!
So, where does this money come from? Thin air! That’s right—banks create money like a magician pulling a rabbit out of a hat. The moment you sign on the dotted line for a loan, the bank taps a few keys, and poof! there’s a deposit in your account. This money isn’t drawn from some secret vault; it’s simply conjured from the digital void, materializing as if by financial sorcery. Your mortgage? That’s a rabbit. The bank’s keyboard? That’s the hat. And the magician? Well, that’s the guy who’s probably wondering how to pass the time until lunch.
The Fiat Illusion: The Power of a Government Decree:
This whole process is what we call "fiat currency," a term derived from the Latin word 'fieri,' meaning "an arbitrary act or decree." In simpler terms, one day, some folks in government got together and declared, “Let there be money!” And, lo and behold, there was. And what is this mighty fiat currency backed by? Gold? Silver? Precious jewels? Nope—just paper. Yep, the same stuff you use to jot down your grocery list. It’s as if Monopoly money put on a suit and decided it was time to play with the big boys.
Money Doesn’t Grow on Trees, It’s Easier!
So, the next time someone says, "Money doesn’t grow on trees," go ahead and chuckle. While growing trees might require a green thumb, creating money only requires a thumb—a thumb on a keyboard, that is. Who knew economics could be so... effortless? Forget the rake and watering can, and embrace the power of a few well-placed keystrokes. Because in the world of modern finance, money doesn’t need roots—it just needs Wi-Fi.
Footnote: A Serious Warning
While the light-hearted tone of this narrative highlights the ease with which money is created in our modern financial system, it's important to recognize the potential risks and consequences. The creation of money through debt can lead to economic instability, inflation, and unsustainable levels of personal and national debt.
When money is created without tangible backing, it can undermine the value of currency, erode savings, and increase financial inequality. It's essential to approach these issues with a critical eye and understand the broader implications for both the economy and society. Financial literacy and responsible banking practices are crucial to ensuring a stable and sustainable economic future.
