I don’t know that I agree that all money is inherently debt, but I do agree that paper money is inherently a form of debt because it is used in lieu of the custodial gold, silver (or other asset of intrinsic value) that is “supposed” to back it.
That said, I subscribe to the principle that paper money should only be created to the extent that it can be “repaid” by redeeming the asset that backs it. In other words, I don’t have a problem with concept of paper money as debt, but I do have a problem with the concept of loaning more paper money than there are assets to back it. And that’s the way paper money is being created today: in infinite quantities.
But even to the extent that paper money is deemed an I.O.U., I still don’t consider it debt in the same way that our debt-based economy operates now. We’ve now reached the point where money can’t even exist unless debt, i.e. loans are created out of thin air. In fact, 97% of all money “created” today is done so in the form of private commercial loans. Irving Fischer, the renowned professor of economics at Yale University, famously observed in his 1935 book, 100% Money:
“Someone has to borrow every dollar we have in circulation, cash, or credit. If the banks create ample synthetic money we are prosperous; if not, we starve. We are absolutely without a permanent money system. When one gets a complete grasp of the picture, the tragic absurdity of our hopeless situation is almost incredible — but there it is.”
In other words, in our current monetary system, money simply can’t exist unless someone borrows money from banks. That money is created out of thin air. And every time money is borrowed, interest payments are due. And that means that more money must be created to make those interest payments. And the bubble just keeps getting bigger, growing ad nauseam and strangling the purchasing power of a currency.
That’s my fundamental problem with the current monetary system. I don’t think we have to live this way. We haven’t always lived this way. I dream of returning to the world as it was before central banks existed. Do I have all the answers? No. Do I have most of the answers? No. But I think I understand the core of the problem, and I also think that if more people understood the core of the problem and we focused our attention on crafting a solution, we could make it happen. The world is full of bright, innovative people. They just need the space to unleash their genius to help us right our economic ship. But right now, the captains at the helm are steering us to a rocky shore, and the passengers are completely clueless.
It’s time for a mutiny.
