How we destroy money by Richard Murphy, Professor of Economics

Yesterday Richard spoke about how we make money, today we find out how money is destroyed.

Recorded at Spotted in Studios

#money #economics #ukeconomy

[runthomas]

he should mention what happens when people dont repay their loans....because that money now actually exists....and the bank has to balance its own books with the central bank.
it is no longer being nullified by loan repayments.
so the bank takes a loss, and pays the loan itself from its profits in interest, and sells teh debt to some debt collection agency for pennies on the pound, or if the debt is large it will try and get heavy itself.

[PhilDocking]

So, there we have it - money is created out of nothing, as a social construct, and is actually only an ephemeral "promise", a token, an IOU.

Money comes to you in return for your labour, via the economy, as money which is created by the state and is paid originally to government employees.

When you take out a loan, money is directly created by the bank, but then you have to pay off the loan with interest. The interest goes to the Bank to pay for the loan servicing, and as profits.

As you pay off a loan, that money is destroyed.

When you pay your taxes, that money is destroyed.

It does seem to make money rather pointless. - Perhaps the whole cycle could continue, as above, but we could do away with the "money" part...?

[unclestephen]

I can't find any this money stuff in your blog. It's too big and no proper search ability. Try searching for "money"! Please put up some links!

[andielines]

Could you explain EXACTLY how creating money leads to inflation, please? Because the assumption that it does, seems to rely on some of the old inaccurate misconceptions about money creation did.

[Abdullah-london]

Can any UK bank provide a loan to eligible applicants without having any funds available for it to lend out?

[AndreaCasalotti]

If the borrower spends the money in consumption and then is unable to repay the loan, the bank has a non-performing loan on their book. If it decides to book the loss, close the loan account, is money being destroyed? Presumably the bank's equity has taken a hit.

[mdc]

If the taxes isn't actually putting the money in a big pot and is actually being destroyed by the government, that how does the government pay for government programs with tax revenue? Or is this a different case than whats being described in this video?

[GMSKI]

"Money is a structure of totalitarian domination"

[wy]

where do the interest amount come out of this this world?

original principle destroyed . but what about the interest creation and destruction?

[WwoJakkk]

yep . this is how i figured taxes are. basically a tool to reduce government generated inflation

[johnburns]

*1)* I take a £30, 000 loan for a car over three years.
*2)* The bank creates the money out of thin air.
*3)* Money put into my account.
*4)* Car dealer is paid - he takes his cut and pays the wages of his staff, property taxes, other taxes and car manufacturer. *That money is circulated into the economy.*
*5)* The car manufacturer pays his staff, taxes and suppliers. *That money is circulated into the economy.*
*6)* I pay back the loan to the bank each month, with interest.
*7)* The bank pays its staff and taxes with that money. *The money circulates into the economy.*
*8)* When I fully repay the £30, 000 loan after three years, the bank _destroys_ the money, as they never had the money in the first place as it was created from thin air. If they do not destroy the money, they are printing money for themselves, so it has to be destroyed.
*9)* So I work and the money (£30, 000) which I got up front from a bank goes _directly_ into the economy, doing good. I pay for this money circulating into the economy, over three years.

*But what an earner for the banks.* They create £30, 000 out of thin air, do get to keep the £30, 000, then charge interest on £30, 000. £30, 000 they never had in the first place. Money for nothing.

So, HMG, via banks, creates the money for a loan out of thin air. I pay the loan back, then this money created out of thin air is destroyed. It is only in existence during the loan period. If there is no debt there is little money floating around.

If HMG wants to create money out of thin air, maybe it will be better for society to use it for a Universal Basic Income (UBI). Then maybe fewer loans, with less use of banks.

[GameDevNerd]

Other Americans flip out or even attempt to ridicule me when I tell them there is no "taxpayer money" and it all gets destroyed. Joke is on them ...

[bruirn]

What would happen if all the billions of pounds that currently up in overseas bank accounts due to tax avoidance schemes was suddenly paid to the government?

[finbarrsullivan]

I will never repay a Loan nor shall I tax again for ever more. Everyone happy I have created more money.
This time next year we will all be millionares.This could be the creation of a new religion, lets call it Murpheys Law.