Paul Grignon’s “Money as Debt” video tells a interesting story on the history of debt and what debt means for society. The video makes clear that the creation of wealth is completely dependent on money generated from debt. Money is created as debt and regulated through fractional reserve requirements for banks that the federal government sets up. Over time, banks have circumvented reserve requirements to lend out much more in effect than the federal government stipulates.

Lender or Debtor?

As individuals, we have a role in perpetuating the continued growth of this debt that everything depends on. In fact, each individual in society functions as either a lender or a debtor. The lenders over time acquire a greater and greater share of total existing wealth. What isn’t pointed out in the video is that someone who both lends and holds debt in the form of things like outstanding credit card balances or other loans only ultimately becomes a “real” lender if their money invested can grow faster than the amount of money they owe plus inflation. Setting up a plan to identify, manage, and prioritize to pay down debt is in a sense the strategy for transforming from a debtor to a lender; only as a “lender” can one effectively invest for retirement and set aside for college tuitions.