With so much public discourse on inconsequential topics like who the next President will be, I wish that we could devote the same energy to the global banking and monetary system.

This thread is a brief journey down that rabbit hole

A starting point is to dispel the myth that governments create their own currency. Since the 17th Century when London goldsmiths issued promissory notes, it has actually been the commercial banks who issue currency, not governments.

From that time on, the kings couldn't fund their own wars as the power to print money sat outside the government and in private hands. When you read conspiracies about families like the Rothschilds, it's because they ultimately controlled the money supply.

And ultimately it's the controller of the money supply who decides who wins and loses, because when you "you control the debt, you control everything".

Real power in a society comes from the control of purchasing power allocation. Still today, that power is not vested in our elected institutions and sits outside of parliament in the commercial banking system.

Even our unelected Central Bankers, despite their enormous influence on global banking, do not have the ability to create money beyond their printed bank notes which make up a tiny ~2% of the total money supply.

Despite much debate on the technicalities ( @MetreSteven vs @LynAldenContact @LukeGromen), they can monetize government deficits. Historically these deficits have been a relatively small portion of GDP.

But a ~20% deficit monetised by The Fed this year sets a dangerous precedent. What's stopping them monetizing a deficit that's 100% of GDP?

Still, actual money creation (not debt monetization), can only happen via commercial banks. This process happens when they issue loans - an accounting ledger entry shows an asset on the banks balance sheet and a liability of the creditors.

Despite public perception, this money is not allocated from anywhere and nor is it someone else's deposit that has been loaned. It is created from thin air.

@ProfessorWerner, whose understanding of the banking systems is unparalleled, explains that credit can be created to fund 3 categories: productive investments, consumption or asset purchases.

A challenge is that finding productive investments is becoming increasingly difficult. The economics of new world companies are fundamentally different to the major companies of past eras. https://twitter.com/charliebilello/status/1153652698824224768?s=20

@JeffBooth makes a strong argument that modern technology is exponentially deflationary. As an example, think of all the services we now access for free - email, communication, media etc. This creates a challenge for finding projects that satisfy the productive credit criteria.

Adding to this is that commercial banks, the only creators of money, are ill-equipped to assess let alone create productive credit for @a16z style "time to build" projects.
It's a lot easier for them to fund a factory that produces widgets. https://a16z.com/2020/04/18/its-time-to-build/

This creates a major challenge for governments and Central Banks, given that our debt based economic system is incongruent with persistent deflation. The 1930's Great Depression as our last example of how that scenario plays out.

But they're fighting a losing battle with major deflationary forces . Globalisation, demographics (baby boomers retiring), unproductive debt drag & technology are all contributing to a 40 year trend in falling interest rates (which are now either at the zero bound or negative).

And because they cannot allow deflation, consumptive credit and asset credit is being created in desperate attempts to counter it. This doesn't solve problems, it just kicks the can down the road and creates enormous wealth inequality in the process.

Despite this, Central Bankers remain committed to "creating inflation for price stability" which sounds more palatable to the uninformed citizen than what's really happening  -  a rapid decrease in their purchasing power, keeping everyone on the hamster wheel.

Central Bankers actual powers remain limited though. Fortunately, the best times to increase the scope of powers is during a crisis. If you question whether they might therefore be incentivised to create crises, follow @Ben__Rickert to go down that rabbit hole.

The next set of tricks are clear - UBI, MMT & Central Bank Digital Currencies. What these innovations will do is end a multi-century battle to move the power to allocate purchasing power to governments (or rather, unelected central bankers). https://twitter.com/RaoulGMI/status/1317836119149580288?s=20

What appears a certain outcome of this is that fiat currency is going to be debased at an extraordinary rate. This will destroy savings and is the reason why many are moving into precious metals and #Bitcoin to preserve their wealth.

What's more concerning is that total control over the allocation of purchasing power makes governments all powerful & sets a dangerous framework that can have devastating impacts if the biggest bully takes control.

Because history shows time and time again that "power tends to corrupt, but absolute power corrupts absolutely". To see the potential ramifications, the failed Soviet State is a great place to start.

Though Henry Ford's words were prescient, the lack of public discourse on this situation is our greatest risk to society. I'd rather risk the revolution tomorrow and bring it into the open than get too far down a path that we can't come back from.