Anthropologist David Graeber:
I’d like to talk today about the greatest taboo of all. Let’s call it the Peter-Paul principle: the less the government is in debt, the more everybody else is.
You may be objecting at this point: but why does anybody have to be in debt? Why can’t everybody just balance their budgets? Governments, households, corporations … Everyone lives within their means and nobody ends up owing anything. Why can’t we just do that?
Well there’s an answer to that too: then there wouldn’t be any money.
Money is debt.
Pounds are either circulating government debt, or they’re created by banks by making loans. That’s where money comes from. Obviously if nobody took out any loans at all, there wouldn’t be any money. The economy would collapse.
The whole article is worth reading in full. If you’re familiar with these facts then you’ll be delighted to see them so clearly expressed. If these ideas are new to you, then I recommend reading Graeber’s book Debt: The First 5000 years. I’ve previously written about the Bank of England explaining how money is created and what was said when parliament debated the topic.