I read an interesting post at Mymoneyblog.com (one of my regular reads) the other day entitled Where Does Money Really Come from? The author posted a flash video that I think everybody should watch(he didn't create it, he just found it). It outlines the fundamental concepts behind our modern banking system, and in some ways is quite scary. The animation is hokey but the lesson is vital. The last 15 minutes of the video get all conspiracy theory on you, so take what you will from it.
I think he is spot on when he says exponential growth cannot be maintained infinitely in a world with finite resources. Eventually the world will have to find a sustainable equilibrium between people and resources. I just hope we won't bypass that equilibrium point too far before we realize it.
I think this video also explains some of the reasons behind inflation as well.
The video's author dosen't really account for all the money losses though. For example, right now banks are buying other banks( and their assets) for a fraction of what they are "worth". When business fail they take a chunk of money out of supply. When a companies stock price plummets, it takes a lot of peoples money with it. These factors mitigate the overall money supply and inflation rate.
His idea of a system where there is no interest, and where government taxes and money creation control the money supply, seems to be trading one set of rules for a different set, with the net sum being zero. The idea that if the government had no more interest payments to make, there would be more money for infrastructure is true under our current system, but would it be true under his proposed system? My instinct says no.
His views on interest are somewhat simplistic as well. Lending money at 0% interest is unsustainable because not all loans will be repaid. No one would lend money when the profit is zero but the losses are greater than zero. Furthermore, the interest to repay a loan does not need to increase the overall money supply. A person (or business) makes choices about how to spend their money. Some of it goes to food and shelter, and some of it may go to interest, or it may go toward a flat screen television instead.
The video's assertion that if there were no debt there would be no money under our current system is ridiculous. In that case the supply would reach equilibrium and interest rates would go to zero on money deposited in a bank, because there would be no major lending going on.
And finally, do bankers really want to own and control society? Hardly. They don't want to own everything, because owneing things is expensive. It's much easier to just deal with money. As for control, it depends on how much you let them control you. If you have no debt, then they have no leaverage. His assertion that banks would promote certain industries while suppressing others seems kind of strange too. I think greed will win out every time. If there is money to be made, the bankers will support.There is also the Federal Reserve to contend with.