Healthy Money Healthy Planet - library.uniteddiversity.coop

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I agree that there is nothing wrong with creating money out of nothing
because that is what creation is. And I agree that there is certainly nothing
wrong with creating money as debt when money is spent into circulation, since
all money is essentially an IOU, or a debt. And nor is there anything wrong
with publicly owned banks creating debt­based money on behalf of the public,
as long at it is created interest­free.
But if commercial banks create money as interest­bearing debt and this scarce
currency comes to dominate – as it has today – then we certainly have an
unbalanced and dysfunctional money system.
Banks provide a service by creating the money supply. Part of this service is
that they collect surplus money and redirect it into investments.
Yes, someone has to create money, but not as interest­bearing debt. Islamic
banks and trade barter companies create money as debt, and this is seen as a
service. This interest­free money does not start a debt spiral, nor does it
systematically transfer money from the majority to the minority. But in
providing this ‘service’, banks shape the social system and stand to gain. As
economist John Galbraith wrote in his book Money: Whence it Came, Where it
Went: ‘The discovery that banks could [so] create money came very early in the
development of banking. There was interest to be earned. Where such reward is
waiting, men have a natural instinct for innovation.’ 1
When they redirect surplus money into profitable investments, banks take
little risk. This is in contrast with Islamic banks, which share the risk by
becoming joint owners of the business until the contract is renegotiated. But in