The Divide: A Brief Guide to Global Inequality and its Solutions

by Jason Hickel

But even debt cancellation would only provide a short-term fix; it wouldn’t really address the root problem, which is the fact that the global economic system runs on money that is itself debt. When you walk into a bank to take out a loan, you assume that the bank is lending you money it has in its reserve – real money that it stores in a basement vault, for example, collected from other people’s deposits. But that’s not how it works. Banks are only required to hold reserves worth about 10 per cent of the money they lend out. This is known as ‘fractional reserve banking’. In other words, banks lend out about ten times more money than they actually have. So where does that extra money come from, if it doesn’t actually exist? The banks create it out of thin air. They loan it into existence. About 90 per cent of the money that is presently circulating in our economy is created in this manner. In other words, almost every single dollar that passes through your hands represents somebody’s debt. And every dollar of debt has to be paid back with interest – with more work, more production or more extraction. The

It just doesn't stop