Money is not wealth. Wealth only exists in real things that people produce and you consume, or more properly take pleasure in owning. Unless you are a very sad person whose pleasure is in counting and admiring a pile of bits of crinkly notes, money is only valuable insofar as it allows the person who has it to buy things, goods or services that add to their store of wealth.

For most people, money is just a unit of accounting that tells them they have sold their labour (or something else) for a certain amount of wealth’s worth that they can use later to buy some real wealth. It gets over the problem of so called “coincidence of demand” – that at the time you sell your labour or goods you may not in that instant want something the person buying it from you has to offer.

In a world of uncertainty, it is prudent, if we are able to, most of the time at least, to hold a little bit of money in reserve so that we can eke it out and survive if for some reason we are unable to get more of it before we need to pay our bills, buy more food and otherwise fulfil the basic needs of life. That’s just what prudent companies do to ensure they can pay you every month and buy things to sell before you come along to buy them.

But really “saving”, putting something away for that ever-looming “rainy day”, is where money (“cash”) falls down as an asset class. And in doing so it does immense damage to us all – our financial fortunes, our environment, our society.

In the context of establishing our idea of a “Community Finance Partnership” a friend and I have been reading up on various community finance networks that sprung up at the time of the Great Depression. And I believe I have finally had an epiphany in my understanding of “usury”.

Many of the groups and systems I have been looking at, formed during the Depression to help make up for the lack of circulating currency which was making a bad situation worse, worked on the understanding that charging or paying interest was itself the major problem that had led to the “credit crunch” of the time.

Interest bearing cash tries to turn money from being a means of exchange and unit of account into something fundamentally different – a store of value. It encourages the hoarding of cash balances, which are then not available to be spent in the real productive economy.

The charging of interest on loans means that the borrower has to acquire more money than they borrowed in order to pay off the principal and the interest. We have a tiny amount of non-interest bearing “money” in our system. In the UK, prior at least to the recent troubles, this amounted to only about £50bn – in the form of issued notes and coins. All the other purchasing power in our accounts was created as interest bearing debt and so over 97% of our purchasing power needs repaying at some point, with interest.

The JAK bank in Sweden, which has its origins in a similar Depression-era Danish venture, calculates that up to between 30% and 40% of everything we spend goes on paying this embedded interest committed to by all the borrowers in the supply chain of the goods and services we are purchasing and have been created in the past. This represents a huge transfer of wealth from those who have little, to those who own the financial institutions that create this debt-based purchasing power.

In such a system also, inflation is virtually guaranteed, as it helps those in debt (most often governments telling us they are acting in our name) reduce the value of their debt by reducing the purchasing power of those who hold current purchasing power unencumbered by debt. This is a transfer of wealth from those prudent enough to operate within their means to those who don’t.

It is a vicious cycle at the centre of our economic lives that allows the rich and powerful, including states and bankers, to manipulate our purchasing power for their ends rather than ours. If we did not have to finance this 30-40% embedded interest then, not only would our purchasing power hold its value better, but we’d have 30-40% more of it, for the same amount of labour sold, with which to purchase real wealth and get closer to financial independence.

Money is a human creation, and the way it operates can be changed by human intervention. If we do not change it now, in the process of rebuilding the financial system that has just crashed, we are doomed, absolutely inevitably, to repeat this crisis in the future. And we should not be afraid to demand such change. After all, it affects the vast majority of us negatively at the moment and only benefits a tiny minority. It is a test of our democracy if you like that we must rebuild the system in a way that works for the majority rather than against the majoroity.