Money Is Just a Promise: The Hidden Truth About Our Financial System

Money is not what we think it is. Despite being used daily, most of our understanding about money misrepresents its true nature. In this video, economist Richard Murphy explains that money is not a physical thing but rather a promise to pay.

Banknotes, coins, and the numbers in your bank account are all representations of promises made by governments, banks, or other individuals. These promises record debts between people, banks, and governments. The £20 note printed by the Bank of England, for example, is just a piece of polymer that says 'I promise to pay the bearer...'. This is not money itself but a promise to pay.

Even your bank account balance is not actual money but someone else's promise to you. When you have an overdraft, you're making a promise to repay your bank, which creates new money through accounting.

This concept of money as promises and accounting has been in place for centuries. Even with the gold standard, money was still backed by governments' promises rather than physical products. The abandonment of the gold standard in 1971 did not change this fundamental nature of money.