Money as debt

With the recent news of banks and credit institutions like Bear Stearns, Fannie Mae, Freddie Mac, and now Lehman Brothers and Merrill Lynch going spectacularly bankrupt or being rescued at the last gasp by the Bank of America, I came to think of a discussion I had not too long ago with some friends on the real nature of money, and how such crises come about.

Back then, much of our discussion was informed by a video I had seen on Google Videos on how today’s money no longer represents actual wealth, but rather future debt. Even though it is a bit too keen on claiming that grand conspiracies are at work in the beginning and at the end of the film, it’s still well worth a view, as it also provides a good explanation of how money and debt works (and, at times, fails) in today’s market economy:

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