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This article exposes the fundamental economic factor that undermines all well-meaning efforts at sustaining, producing and maintaining social and environmental integrity. It is descriptive of a fiscal flaw that holds in check the moral growth of our global community and tears at the very fibre of its creativity. This flaw is an emergent factor in all the so far unsuccessful global bids at controlling pollution and exploitation. It also happens to be central to the way finance is created and is basic to finance’s general scarcity; a situation endemic to the economics of commerce.

We suffer an inappropriate restriction of access to products, to the means of production, distribution and services. Shortage is a much-misused word. The phrase ‘shortage of’, used in media parlance conveys a perception of a scarcity of material resources and or human resources etc when no such exists. Used in the context of world economics the term is misleading as it tiptoes ever so carefully around the edges of a hard fact that we all know but dare not utter. As consumers what we mostly suffer in a general sense is a global lack of access to resources not a lack of resources per se.

There is a perfectly reasonable explanation for this paradox affecting the ‘civilised’ world: wherein the midst of physical plenty and technological know-how the majority of the globe’s inhabitants must go without. This anomaly of hardship and want in a technological world of material plenty is the result of the universal methodology used to bring money into existence. The method used produces the scarcity of finance that impedes the equitable distribution of goods and services and severely inhibits the global community’s ability to consume those things that should be everyone’s birthright. A fundamental tenet of the present monetary system is its insistence on creating money as s scarce product. It is this aspect of economics and its far-reaching effects that I wish to highlight.

The insurmountable problems faced by industry, business, and government institutions in maintaining a profitable balance that translates into the required growth rate for financial stability, is self-evident. The general scarcity of finance is the dominant factor in the difficult situation faced by most businesses. They struggle to remain viable while providing suitable worker conditions and pay. Likewise, most governments are unable to adequately finance socially essential services and facilities. In most of these situations sustainable environmental and social practice goes on the back burner.

The only restricting factor to a community achieving adequate sustainable industries, social infrastructures and facilities should be its physical resources and its available skills and ability. Yet the scarcity of money makes this financially impossible, it is the one constant debilitating factor that threatens humanity’s hopes and dreams of an environmental friendly, democratic and civilised world.

Because of the scarcity factor most organisations exist in survival mode. A survival requirement for commercial and government sectors is to continually cut costs and financially exploit all resources to the limit. This is a forced behavioural rationalisation and it results from an easily rectified economic defect. The question may well be asked, ‘is this climate of unnecessary shortage and scarcity the cornerstone on which the present system is built’? I believe it is.

In spite of the overwhelming evidence that the lack of funds adversely affects humanity’s handling of the environment, our relationships and our daily lives, we give the situation a catatonic like acceptance. Yet we all suffer, for even the very rich and other elite must breathe the air and endure the perils of global warming.

From the CEOs of every industry and the staff of every government department and public facility, from the treasurer down to the local shire-councillor, we hear the cry of, "insufficient funds" with which to carry out initiatives vital to planetary wellbeing and social cohesion. However, far from this being an excuse from those groups that are seen as ‘caring only for profits’, it is a genuine reason. The present universal method of finance creation, forces them to put profitability and unfortunately, their competitive behaviour (survival) before other considerations. They are left with no alternative but to financially compete with each other and with ‘nature’ in a desperate cut-throat ‘economically rational’, destructive, cycle of exploitation.

Any industry, any business will explain that in order to survive the scarcity factor they must downsize staff numbers, get more production from lower wages, cut back on services or increase charges or both and minimise on financial expenditure in all departments. We would do well to remember that the physical resources, skills and labour required for a sustainable world are not scarce, it is the funds needed to access them that are in short supply.

On an emotional level, scarcity creates the stress and negativity that adversely affects billions of people worldwide. It is an illusion of insufficiency brought on by a fiscal aberration where economic reform is long overdue.

Constant ‘environmental and social impact studies’, that produce more petitions, protests and blockades are but naive measures destined to fail without the implementation of this sorely needed revision.

The actual process criticised here is the method where money is created out of nothing and credited into a borrowers account which is then called a bank deposit; in that sense only can the uninformed say that "banks lend peoples deposits". The bank institution has created it, approved a loan application and opened an account in that name and called that amount a deposit. In this way a bank creates and lends customers the money that then becomes their deposit. A bank or individual may invest capital that has been accumulated but this is a completely different function because someone somewhere has already borrowed this money - it is already in circulation. In granting a loan, banks do not lend from your savings account; they create the loan money.

The Bank of NSW Review, Number 27, 1978 tells us "[An] important source of money creation is by the banks." … "They have the capacity to create money because their liabilities (deposits) are accepted as money. The Review proceeds to confirm that a bank calls the money it has created as a loan, a deposit, (it has been deposited into the borrower’s special account) "The largest proportion of bank assets is in overdrafts and loans. When a banker grants a customer credit by overdraft, the bank ‘opens an account’ in its books and gives the client the right to draw funds without first having to put money into the account. But bank deposits only increase when the customer actually draws on the account to pay his creditors." Money, while in circulation, is actually a debit to the community; created by the granting of a bank loan or bank overdraft, which is merely an advance of money that was not previously in existence. When the loan is repaid both that debt and that money are cancelled.

The bulk of money in circulation got there as wages and salaries paid out of overdraft, the original cost of production. "In the case of loans, [the freshly created] funds are deposited directly into the customer’s credit and results in an immediate increase in the volume of money. In either case the money supply increases as a result of the bank’s lending activities. As long as the debt remains outstanding the community’s quantity of money is increased." The above quote from The Bank of NSW Review shows us that debt-created money no longer exists when repaid. It was created as a loan and can only exist as a loan. The financial system’s 100% reliance on the present method means that there remains no other available source of new money.

And do not both sides indulge in terror of sorts? The present international threat of global terrorism and the global threat of environmental destruction have been travelling parallel paths for a long time. It is a sad fact that both have produced great suffering and tragic loss of life. The reality is that both have their genesis in the same economic realm. The contemporary religious intolerance that is felt on a world basis could well result from the forced (in financial terms) exploitation and marginalisation of the ‘have-nots’ by the ‘haves’. The desperation of those who are disadvantaged could lead to fanaticism and desperate measures. I feel that the fundamentalist reactions of both these groups have to be understood and treated as symptoms of financial scarcity caused by unnecessarily creating money as debt.

Any scenario of scarcity results in competition, confrontation and on to social conflict. It triggers our instinct for self-preservation that all too often produces the aggression that is often misconstrued by most media as greed and selfishness. One has to listen carefully but daily we hear and read of politicians citing financial scarcity to justify their economically rational fund cutting. They cite the necessity for efficiency and budgetary restraints, which translates in cutting jobs and pay packets. Poor balance of payments is the excuse used to explain the delicate state of the national economy; inflation and the protection of our nation’s ‘financial rating’ are reasons for bank rate increases.

Social problems portrayed as the result of ‘greed’ by people with no social conscience are counter-productive to solving the problem. Exposing the underlying root cause of the more obvious problems that assail the ‘social world’ and its impact on our earth’s environment, is no easy task as populist media prefer to hyperbolise and sensationalise the symptoms rather than pursue the underlying cause.

The symptoms, as traumatic as they may be, are by definition only a result. The basic cause which is financial, seldom if ever, rates a mention in mainstream media and is never shown as worthy of an investigation. With this media conditioning we then react, as do simpler organisms, only to the stimulus of the warning sign. Therefore we never pause to consider that there may be an underlying factor that demands our acquisitive behaviour.

Debt creation of money equals scarcity in the midst of plenty. Lack of access to that which we are able to produce or even worse to what we know we are capable of doing sustainable manner must be frustrating in the extreme. However, in spite of the global phenomenon that it is, the overall financial scarcity that restricts us is accepted with equanimity.

However, one criticism that is often heard in this regard is that the scarce commodity we call money is being or has been spent on the wrong projects by government or the private sector but the scarcity receives no mention. Emphasis centres on suitable euphemisms, naming the effects of scarcity rather than, what is actually scarce, such terms as ‘hospitals have a shortage of beds’ is often heard. There is obviously no lack of beds or of nurses or of auxiliary staff or of any other resource in these situations; money is the only scarcity. It is the Hospital Board via the media that tells us that there is a shortage of nurses. Nurses leave the profession in droves because necessary cost cutting causes the downsizing of hospital staff, which increases their workload, responsibilities and stress levels.

I think one could safely reason that a reaction to the human instinct for ‘self-preservation’ and ‘preservation of the species’ would best describe our initial reaction to a perceived threat. A chronic scarcity of the one legitimate means of access to necessary goods and services could easily induce the ceaseless, indecent and competitive scramble to secure enough to ward off the threat of poverty and its consequences. This raises the question of just how much is enough, since debt-money must continually lose value because of the cost of ever rising debt levels and living cost that must constantly rise.

As individuals we are forced to compete with each other. In the present culture of scarcity, the ability to compete is promoted from infancy on, as a must for success in most careers. The culture of competitiveness invades most spheres of human endeavour, producing many of the appalling negative consequences facing society.

‘So-called cooperation’ on the other-hand is taught as a team skill only, so that your team or group, whether local or national, may compete more successfully against the opposing team. In a way, this is a subtle denigration of the whole notion of cooperation. So in reality, the ability to cooperate may be defined as just another way of improving our skills at competition. True cooperation in this context is just another word for ‘everything to lose’. Subconsciously the world is seen as an arena where human is pitted against human and human against nature.

In business, competition means eliminating the opposition by fair means or other. On an individual basis each hopeful worker must compete against other hopefuls to obtain and if successful, maintain that elusive job, i.e. exclude the other individuals competing for the job. Primary producer’s cooperatives must compete on an international basis for those elusive export markets. The list goes on, infecting most forms of human interaction. On quite a few levels competitive behaviour develops into confrontation and conflict.

Since greed and exploitation have become the necessary tools of financial survival our media economic gurus must focus exclusively on symptoms or risk the unthinkable ie, to question the financial system. We are then in effect ‘shooting the messenger’ by ignoring its message. The present messenger comes to us in the form of environmental and societal ills and its message is this: "there is an underlying un-investigated cause that we ignore at our peril".

Why are the nations of the world financially dependent on their export markets, especially Australia, a nation rich in natural resources? Answer: because of the inability to fund the consumption of local manufacture. Australia transports, at great cost to the environment in energy and pollution, vast quantities of its natural resources overseas and buys it back as white-goods etc. Trade agreements ensure we import cheap primary produce – lets say citrus - while exporting our citrus to the same overseas source.

International buyers must be found that will buy our goods and services so we may earn enough to enable our local consumers to purchase a percentage of our production. We are forced to be competitive because the ‘global export market’, like the local market, has insufficient funds in circulation to purchase all that the global village has produced or is capable of producing. Only the few so-called lucky nations, the first-world countries, find permanent satisfactory export, niche markets.

While an industrial ‘bank loan/overdraft’ mostly gets into circulation as wages and salaries often through capital acquisition, it is subject to interest payments. Interest that is owed to the bank must be included in the cost of producing the goods or services. These payments have to be extracted from the wage money in circulation via prices; as a result the local marketplace is left with insufficient funds to purchase all goods it has produced. It is in no position to offset the financial cost of its manufacturing or service sectors. In other words the local marketplace cannot pay the price of the goods it has produced. Obviously industry needs to recover its costs in order to achieve financial viability. So success in competing for export markets is essential for industry’s financial stability.

An insufficiency of funds in the local market is the main cause of the indecent competitive scramble for an export market. However, all markets whether local or export, are short of purchasing power, such is the nature of the debt system. Exporters at home actually rejoice at another nation’s economic misfortune - the loss of export markets. The collapse may be due to drought, disease, war or pestilence but their financial loss where people suffer may be our gain. Exports are absolutely essential to any country’s ‘financial viability’. For instance, loss of the export market would mean the collapse of our food industry, as the local market can’t match the financial cost of production. No matter how little was produced the amount of money in circulation shrinks in unison with the diminishing production. We would be reduced to third-world standards and slowly starve

So for the Australian food industry to survive financially, it must export the larger proportion of its production (I have seen estimates of 80%). We are forced to be competitive because the ‘global export market’, like the local market, has insufficient funds in circulation to purchase all that the global village has produced or is capable of producing. Only the few so-called lucky nations, the first-world countries, find permanent satisfactory export, niche markets.

High-school economics works from several basic, misleading and therefore incorrect assumptions. The one fundamental to the popular understanding of economics is the previously mentioned false assumption that banks do not create money but lend out the funds that people have deposited with them. This concept of bank function is demonstrably incorrect.

The Reserve Bank Of New Zealand in September 1994 in reply to a letter by Mr Stan Fitchett of Christchurch "Thank you for your letter 24 August regarding the creation of money. As you noted, banks do create money and credit…" "A commonly used definition of the broad money supply is M3…" "…around three percent of M3 is created by the Reserve Bank (currency and primary liquidity), with the remainder being created by commercial banks." Under this monetary system that creates worldwide debt and financial scarcity, all forms of economising becomes an unfortunate but necessary individual and communal survival procedure.

Very few people, even those in prominent and powerful positions seem to have the slightest conception of where money comes from - of how new money comes into being. To them, the manner of its creation is not worthy of investigation. It has no real significance as they deal exclusively with the finance that is already in existence or bank rates that control and the resultant complex and at times chaotic economy. Many assume that work creates money!!!

In the media we are daily presented with certain contradictory economic statements. We are often told that the economy is booming and the nation is becoming ‘wealthier’ by the day. At the same time we are asked to accept the contrary. That for the sake of efficiency, the public are expected to accept that funds must be cut that would properly educate our children or provide for proper health care and safety nets for the poor or to protect the environment. The private sector must make pay cuts to workers and so it is unable to furnish a decent living wage for the majority of working people. Government funding for the arts, research and development or the public broadcaster must be reduced, or adequate pensions for the elderly are not available and so on to another ‘round Robin’ of cost slashing or ‘round of robbing Peter to pay Paul’ sic.

When daily bombarded with news about the parlous state of the world economy, whilst being told ‘we’re becoming, wealthier by the day’ it seems astounding that interviewers, columnists and experts in the field of economics, never question the constant shortage of funds. It is as though this arbitrary scarcity is seen as a fact of nature like the weather or an earthquake and completely beyond the realms of human intervention.

Money is not earned into existence by production, or service. Work as hard as you will, produce and trade as much as you will, not one new cent will be created - unless you borrow. Money is created out of nothing when a bank approves a loan application. This is the only means the marketplace has of access to new money. Unfortunately for the borrowing community, this money is obviously not credit but in the long-term, unrepayable debt. What they have in fact is an economy running on and credited with debt finance.

The persistent bottom line answer from captains of industry and government, as to why industrial, social and environmental problems perpetually arise is of course "insufficient funds". Far from being the incredibly profitable organisations of popular perception, most industries walk the razor’s edge of profitability on one side and bankruptcy on the other.

The following short-list of casualties result from the restrictive practices of the present system.

For the media interviewer not to question this ‘scarcity factor’ is either a gross negligence or a mental conditioning designed to overlook the obvious. Though it is doubtful if the interviewee could give a coherent answer as to why there is a shortage! Not knowing how money is created, the muttered reply, if glib, may be that "money doesn’t grow on trees", or if more condescending, that "costs such as labour and taxation and bank rates are high". The point is that the question is never asked, so we can only assume that it highlights an appalling lack of interest in and knowledge of money creation.

Any genuine worthwhile progress towards saving the planet depends entirely upon sufficient funding through worldwide monetary reform, in the shape of a completely new form of debt free creation of finance.

Governments are entitled to fund all government expenditure with government created money; this type of money creation puts money that represents real wealth instead of debt, into circulation. Without such monetary reform, the dream of global sustainability is made financially unattainable. Even though all other resources may be plentiful, without sufficient funds, any improvement to the present situation is rendered physically impossible.

What is actually required then, is not money that is a commodity in itself but a monetary system that represents product-wealth (real wealth) by acting only as a ‘convenient means of exchange’ of goods and services. The Australian and USA’s, Constitution, make provision for their respective governments to create instead of borrow all finances for governmental expenditure if they so wish. This provision if utilised would put billions of debt and interest-free dollars into circulation and make more financially possible a sustainable global practice.

In conclusion, I would like to emphasise that to focus on and accuse certain groups or individuals of upholding the debt system is as untimely as it is unwise and counter productive. We should however remember that by not questioning the present debt system of creating money, we all participate, albeit involuntarily and unknowingly, in the on-going destruction of the planet and of society. My hope is that those with the capacity to comprehend the underlying briefly outlined factors, heed the pressing need for research into worldwide monetary reform. There would then of course remain the issue of raising public awareness of the benefits that would accrue.