Money Quotes

Money is created when banks lend it into existence. When a bank provides you with a $100,000 mortgage, it creates only the principal, which you spend and which then circulates in the economy. The bank expects you to pay back $200,000 over the next 20 years, but it doesn’t create the second $100,000 – the interest. Instead, the bank sends you out into the tough world to battle against everybody else to bring back the second $100,000.

All the banks are doing the same thing when they lend money into existence. That is why the decisions made by central banks, like the Federal Reserve in the US, are so important – increased interest costs automatically determine a larger proportion of necessary bankruptcies.

So when the bank verifies your “creditworthiness,” it is really checking whether you are capable of competing and winning against other players – able to extract the second $100,000 that was never created. And if you fail in that game, you lose your house or whatever other collateral you had to put up.

- Bernard Lietaer¹

1. Beyond Greed and Scarcity in Yes! Magazine, Summer 1997 [↩]