“Money Is Created Out Of Thin Air!” – Red Hot Chili Peppernomics

Here’s me doing every single Red Hot Chili Peppers song in 30 seconds.

Now we need to get into economics. I’ll come back to the Red Hot Chili Peppers in a sec.

What if I told you money was created out of thin air?

In March last year, The Bank Of England fessed up that this was happening.

Which means that a country like the UK (or the US), with a non-convertible*, sovereign currency** can spend whatever it wants and never run out of money. Which throws the case for austerity out of the window. I’m serious. The Bank Of England is serious. Read up on it.

Back in the day, people used to say, “I don’t need to read, there’s only one book and the guy in church tells me what it says.” Easy to control people back then.

Well, now the new “I don’t need to read” is “I don’t need to understand economics.”

If you can learn to drive a car (which takes intense concentration and where one slip-up can have fatal consequences) after, say, 20 hours instruction – you can nail this. At least to the point where you can argue with this post. Most people learn to drive.

I wanted to do my part in changing the conversation, but unfortunately I found myself being a musical comedian rather than a college professor, or an FT journalist, so I thought I’d try and make musical comedy out of the issue. I thought it’d be funny to have the Red Hot Chili Peppers (who only have two things on their minds) tackle the subject. The song’s called “Spend Your Wad”.

I put the song into an Edinburgh Fringe show. So far the conversation on austerity hasn’t changed. I don’t know, maybe I’m doing something wrong. I’m not going to blame myself, though. When an institution like the Bank Of England says explicitly that money is created out of thin air and the news ends up on the back pages to make room for celebrity gossip… Well, it’s almost like the media has a vested interest in cultivating a bovine audience.

The world is full of clever people. The world is screwed. Something tells me the clever people are not pulling their weight. The rest of us need to clever up.

This three-minute video of Warren Mosler describing how to turn litter into money is a great place to start.

*Non-convertible currency means you can’t exchange it for gold. It’s not a promise to pay the bearer anything on demand, like in the old days.

**A sovereign currency means we create it, unlike say Greece. The Euro is a stateless currency, so the Eurozone member states have to ask the European Central Bank for Euros when they need some. Which is why the PIGS (Portugal, Ireland, Greece, Spain) have had so much economic pain.