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  1. Michael Kumhoff presents his opinion that the study of money creation by economists is still in its infancy. Worse still, as noted by both Ulf and Steve, the understanding of money creation by economists seems to lag far behind that of the public. There’s a good reason that is the case as I explain in my comments on Ulf’s presentation.

    I was initiated into an un-ambivalent understanding of money creation in 1993. My mentor was a logger/developer.  This was confirmed by my good friend and close ally in local politics, a “renegade” senior economist retired from the World Bank. 

    In 2002, I was tutored by Canada’s foremost forensic economist in the history of third party debt being enforceable in court – the requirement necessary for such debt to be usable as money (explained in Money as Debt II – Promises Unleashed 2009). I made the initial 2006 Money as Debt movie at the urging and with the references help of a senior member of the American Monetary Institute, now deceased, who complained to me that no one at AMI understood what he was trying to tell them – which is the same thing I am trying to awaken everyone to now and which I first illustrated at great length in Money as Debt II. 

    Money is created as principal debt to a bank and then lent as loanable funds concurrently multiple times within the lifespan of mortgage principal.  Impossible principal debt and the grow-or-collapse imperative are therefore mathematically inevitable by design of the system.

    Since 2006, I have made several movies explaining the subject in great depth to many millions of people worldwide, some translated into at least 26 languages. I have written several essays that go well beyond the false dichotomy of money creation or loanable funds with the aim of providing logical proof that the root of the problem is money as “a single quantity of anything made valuable by its own scarcity”.  A gold coin lent into circulation is “money as debt” as surely as is bank credit. 

    In 2013 I was invited and helped by the Editor to write a paper for peer review that was published by the World Economics Association (link at bottom of page). It is exactly the same argument I have been making in my comments here and in the following short cartoons designed to educate the public.  

    • Economists and a Pile of Nuts … 2 min, 17 sec.

    • Credits – 3 Kinds …  6 min.

    • Conference on the political economy of economic metrics 
    Jan. 8 – Feb. 25, 2013 
    Title: Proposed new metric: the Perpetual Debt Level
    It is my contention that a critical metric in economics is missing. I call it the Perpetual Debt Level. This is the amount of bank credit money in circulation that is not available on time nor free of any other debt, to extinguish the debt to a bank that created it. This creates a borrow from Peter to pay Paul and vice versa Perpetual Debt situation in which the amount of the principal involved can never shrink, and the timing of its delivery can never slow down without causing mathematically inevitable defaults. Therefore, to avoid such defaults, it is, in practice, necessary to maintain growth of the money supply at all times. (1)

    I further claim that there is no escape from this destructive arithmetic problem within the concept of money as a quantity of a thing-in-itself, and especially within the current practice of money created as a debt-of-itself. The only remedy is radical – a total transformation of our concept of money.

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