Money is debt

Just as banks can create money, the commercial banks can create money by double entry book keeping. So can central banks...

The real story is the commercial banks generating money and making profit for themselves by creating debt.

They simultaneously create a loan and a deposit without having to take the money out of the account of any other savers.

Professor Steve Keen
University of Western Sydney
Interview on 9 June 2012

 

broad-money-versus-debtIf money only comes into existence when someone goes into debt - then there should be a visual correlation between the total money supply and the total debt in the economy.

This is exactly what we see in the adjacent graph. Note that with the passage of time - the interest that is charged on the debt ensures that the debt figure grows at a faster rate than the money supply.

At the time of writing - the total Australian debt was $2.18 trillion. The data in the graph was sourced from spreadsheets at the RBA:

The Australian Debt Clock provides debt figures on their interactive graph.

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