Many of society’s problems are attributed to our economic system. At MONNETA we are chiefly interested in looking at what problems are created by the design of our money system. Four main problems are intimately connected: a systemic growth imperative, a constant redistribution of wealth from poor to rich and the necessity of constantly growing debt, and not least the role of the money system as the cause of  economic, financial and currency crises .

The stability of the money system depends on belief in future profits and economic growth. The system of credit is a belief system (from the Latin credere = to believe). Credit is the belief in the ability of the borrower to pay back the borrowed money plus interest. Loans include interest repayments. This kind of money system forms the basis of capitalism: capital must yield a profit. The economy must always grow. Crises in the capitalist money and economic system are crises of belief. They occur when there is ‘too little’ growth, not ‘too much’. ‘Too little’ means the original calculations for growth and profit on issuance of the loan turn out to be exaggerated or the belief in them (for whatever reason) dissolves and the expectation of growth is revised more


We have no choice. Whether we want economic growth or not, our capitalistic system needs growth to at least match interest repayments in order to remain stable. The associated regular interest income of the ‘net interest winners’ is not only responsible for the fact that the wealthy become ever wealthier but also for the constant pressure for economic growth that seems inevitable. When interest income is not completely and directly consumed but reinvested at interest (which is especially normal practice with great wealth), then the mighty dynamic of compound interest sets in along with a resulting “growth spiral”. With ever increasing wealth, the demand for interest and resulting profits also increases. In order to balance this, new value has to be created – in other words: growth.
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People say the first million is the hardest if you want to get rich. Let’s get to the bottom of this saying by taking a careful look at what an investor can do with a million Euros. He or she can ‘invest’ their money as most banks, investment fund managers and financial advisors suggest: interest payments are a tempting reward and the greater the wealth invested, the more they flow. The great investment funds such as pension funds receive better conditions than individual savers.

Capital assets   Yearly income (in Euro) from an interest rate of
1% 3% 5% 7% 10%
1000 Euro 10 30 50 70 100
100.000 Euro 1.000 3.000 5.000 7.000 10.000
1.000.000 Euro 10.000 30.000 50.000 70.000 100.000

With an interest rate of 5%, a millionaire receives 50,000 Euros a year for lending her million. That is more than 4,000 Euros a month – with that one can even afford to live well in expensive cities such as Paris or Munich. If the interest is not consumed but reinvested in the asset fund, then the powerful dynamic of compound interest takes over. Instead of 50,000 Euros interest as in the first year, the millionaire receives 52,500 Euros in the second year and over 55,000 Euros in the third year. Not only does her wealth grow but also the extra income on the capital grows too.

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Electricity comes to us from the plug, drinking water from the tap and money from the bank. But most people do not know how money is created. Who makes money? Or, as the experts ask: how is money created?

Cash in Germany is issued by the German Central Bank (Deutsche Bundesbank) and the European Central Bank. A maximum of 10% of money in existence in Germany is cash. Germans love to pay in cash. Other countries use cash much less and the long-term trend is away from cash. Most money only exists digitally as deposits in bank accounts and is created by commercial banks when bank loans are created. This system of money creation is the same all over the world: money is created through credit. Thus money and debt are two sides of the same coin. For each Euro of debt someone else in the world has a Euro of wealth.

What does money creation through credit mean? When a bank gives a 100,000 Euro loan, for example to buy a house, then in principle it creates this money ‘out of nothing’. The bank must keep a minimum reserve of 8% (1) to cover this loan and will demand some kind of collateral, for example in the form of a mortgage; thus credit creation is not unlimited. The bank can, with or without our savings accounts, give credit and thus create money. Banks are actually not only – as is often claimed – intermediaries for money.

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