Firstsource Money - WelcomeReforming SA's Monetary & Banking Systems and the Macroeconomic Framework
What is Firstsource Money?
We are an economic policy research and advocacy team that campaigns for the replacement of the current moribund economic policies, especially the monetary and banking ones, with those that engineer equity, inclusive growth and sustainable development.
We are rooted in the philosophy that money creation, over 95% of which is created by private banks, is profoundly important to be left to private institutions, and that its creation be for public good.
We advocate the sovereign creation of money. An epochal change to this philosophy is both necessary and urgent however challenging it may appear.
The process by which banks create money is so simple that the mind is repelled.John Kenneth Galbraith
We contend that it is the current private money creation system and its supporting structures that is at the centre of most our developmental challenges and is a source of persistent economic and financial instability here and elsewhere in the world.
We argue that there is no valid economic reason for governments to subject their populace to such dehumanising systems if not for ideologically motivated and mendacious convictions or blind support thereof. To appear in public and declare that “there is no money for schools, hospitals, roads etc”, is to clearly not understand money. In a post gold standard world, such statements can only be disingenuous as are ideological.
In contradistinction to other monetary reformers, Firstsource Money goes beyond the money creation issue into the structural apparatus of the financial system, where the real flaws lie and if not corrected, would render any reform futile.
We also clearly state that “creation of money from ‘thin air’” is not the real issue per se, rather, its creation for largely non-public purposes.
Of all the many ways of organising banking, the worst is the one we have today.Sir Mervyn King
We are located at the centre of both political and economic power in South Africa (Pretoria, Johannesburg, Cape Town & Durban) and have a global network of allied organisations and individuals both in academia and outside.
Why does money need to be created by the state?
Paper and coin money as we know it, is but one leg of broad money. Most of us use the word money to denote the currency notes and coins in circulation, yet these constitute about or less that 5% of the total money, depending on the jurisdiction. This is government created money, through the reserve bank.
The other money is created from debt contracts (credit money or loans) between banks and borrowers. This money is then transformed into public money via the link banks have with reserve bank. New money is thus created through loans given to borrowers as deposits in the hands of borrowers.
The difficulty lies, not in the new ideas, but in escaping from the old ones, which ramify, for those brought up as most of us have been, into every corner of our minds.John Maynard Keynes
Banks do not necessarily intermediate between savers and borrowers, as postulated by the Financial Intermediation Theory and the Fractional Reserve Theory (they don’t necessarily lend money that is saved). Money created through this process of loans is spent out there as public money. It is this money (the +95%) that is created by banks from “nothing” or from “thin air”, ex nihilo.
But what does all this mean in real life? As an example, the mortgage bond you have with your bank is money the bank lent you that was just created by way of a book entry. It is not that the bank sweated for it, yet you are charged interest and they resposses your property should you fail to honour the debt contract. This is true for any other debt contract you enter into with your bank. For both individuals and companies, private banks engage in this sort of money creation from thin air. Furthermore, banks can chose who to lend, thus having given themselves the power to allocate or not allocate this precious resource. Read more
In short, Firstsource Money is here to:
- Inform the general public, policy and law makers and thinkers about the link between our current monetary and banking system and the key developmental challenges we face such as unemployment, poverty, inequality and the continuing escalation of the cost of living and doing business.
- Advance practical and sustainable alternatives to employment creation, poverty and debt reduction, reducing the cost of living and related responses to the economic malaise we face; and
- Promote prosperity without debt.
Firstsource Money has joined a coalition of institutions and people across the globe tirelessly campaigning for a fair and equitable economic system.