Money and Sustainability

Bernard Lietaer:

Our money system IS the ‘Missing Link’. We tend to assume that we must have a single, monopolistic currency, funded through bank debt, enforced by a central bank. But we don’t need any such thing! In fact, the present system is outdated, brittle and unfit for purpose (witness the eurozone crisis). Like any other monoculture, it’s profitable at first but ultimately a recipe for economic and environmental disaster.

The alternative is a monetary ‘ecosystem’, with complementary currencies alongside the conventional one. This is more flexible, resilient, fair and sustainable. Societies worked like this in the past. So can we. In 1972, the famous first Report for the Club of Rome – The Limits to Growth – showed how an economic system that demands infinite growth in a finite world is fundamentally unsustainable.

This new Report explains our present monopolistic money system and the flawed thinking that underpins it. It spells out the catastrophic problems – environmental, socio-economic and financial – that we will continue to experience unless we make radical changes.

Finally, it sets out nine practical proposals, which can be implemented now, to run alongside the current money system. This book is essential reading for policy makers, business leaders and economists, anyone concerned about sustainability, those working in the field of monetary systems and anyone with an informed interested in the future of the planet.

Une monnaie libre

Qui possède de la monnaie a une créance sur l’économie : il est en droit d’exiger des autres des valeurs économiques en échange de ses signes monétaires.

Qui ne possède pas ou peu d’unités d’une certaine monnaie, mais se voit intimé d’en avoir, que ce soit l’impôt (pouvoir libératoire) ou, par voie de conséquence, parce que ladite monnaie est un quasi-monopole de fait au sein de la zone économique dans laquelle l’individu évolue, devra obéir à ceux qui détiennent des unités monnaie. Il devra travailler pour eux.

Posséder la monnaie, c’est donc avoir le pouvoir de commander aux autres.

Mais pourquoi le premier aurait-il le droit de commander au second, si le second n’a jamais commandé au premier ?

La Toile de Confiance

Des monnaies qui libèrent

Où est la réciprocité ?

Au nom de quoi le second aurait-il une dette de travail envers le premier, s’il n’a jamais échangé avec lui ?

Duniter est un logiciel développé pour propulser une monnaie libre : la Ğ1.

La monnaie libre est un concept introduit en 2010 par un mathématicien français du nom de Stéphane Laborde dans son ouvrage intitulé Théorie Relative de la monnaie (TRM).

Une monnaie libre met tous ses membres à égalité devant la création monétaire, car elle garantit que :

  1. deux individus créent la même part de monnaie à tout instant t,
  2. deux individus créeront, au cours de leur vie, la même part de monnaie (et ce même s’ils vivent à deux époques différentes).

Cette égalité devant la création monétaire nécessite que la monnaie soit créée uniquement à travers un dividende universel.

Financing a mill

Once upon a time an entrepreneur envisaged a watermill in a village with all the resources and skills to construct one.

The mill’s construction drew on forests and quarries for raw materials, and on carpenters and masons for skills, stimulating demand and thus economic activity.

Once the mill was completed, the village could reduce costs of flour and products such as bread and pastries which could be sold beyond the town limits. Cereals from neighbouring towns were also milled, making the enterprise a success, and the town prosperous.

https://pxhere.com/en/photo/570158


Financing was done by paying contractors and suppliers with IOUs promising a measure of milled flour. These vouchers were found to have value beyond just claiming flour from the mill, since the baker accepted them as payment, and soon other merchants and tradespeople as well, forming part of the currency supply and expanding economic activity.

– – –

In another town, another entrepreneur faced the same challenge of financing but went to the bank. The currency was provided as debt with interest due on any outstanding amount.

This new currency was spent into the community for supplies and skills, causing a boom by expanding the economy. Everyone was happy and grateful to the banker.

https://pixabay.com/en/bankrupt-broke-failure-bankruptcy-2340287/

At the end of each month, the amount owed in interest was taken out of the community by the miller, and other entrepreneurs with loans, to pay the banker. This reduced the currency supply, making it more and more difficult to do business with less and less currency.

Some businesses were obliged to borrow more to keep the doors open, while others cut staff and purchases causing unemployment. Inevitably, business started going bankrupt, leaving the town destitute.

https://www.findmypast.ie/articles/world-records/full-list-of-the-irish-family-history-records/institutions-and-organisations/clare-poor-law-unions-board-of-guardians-minute-books

– – –

So where do banks get the currency that they lend out?

A common misconception is that banks lend the currency deposited by savers. Lenders pay interest charges on their loans, and savers receive interest on their savings.

https://www.flickr.com/photos/68751915@N05/6629034769

When economic activity declines, demand for currency declines, reducing interest rates, thus making it cheaper for entrepreneurs to fund expansion or new businesses, while consumers have less incentive to save, and thus spend more. When the economy “overheats”, the reverse takes place “cooling” the economy through higher rates.

In this scenario, banks are brokers of currency, passing the currency of the saver through to the borrower. They cannot create currency, nor lend out more than they have in savings  (100% reserve requirement).

Currency for expanding economies comes from central banks, such as the publicly owned Banque du Canada that managed currency supply and interest rates prior to 1973. New currency and interest was spent by the government. An alternative proposed by social credit, for example, suggested social dividends paid to each person directly

Both of these approaches to spending new currency and interest strengthened the demand side of the economy, causing expansion either by new spending, or more capital.

– – –

In reality, no government has control of its currency or interest rate (except perhaps(?) North Korea and Iran) since central banks are private banks.

Even the few publicly owned banks such as the Banque du Canada have been relegated to façades since 1973 (in violation of the constitution), which does not even have a lending window to banks since there is no minimum reserve requirement in Canada, UK, and a few others. Even banks in countries with reserve requirements can borrow the fractional reserve from the (private) central bank meaning there is no limit in reality.

What this means is that private banks create national currencies.

Worse, this new currency is not spent by government budgets or social dividends, but issued as debt at interest.

Let us consider interest and debt.

Interest

When a loan is created (out of nothing), the borrower is obliged to repay not only the principal, but the interest. Note that:

  1. All loans thus cannot be paid off since there would then be no currency
  2. The amounts for interest payments are not created

This means that payment of both/either principal or/and interest reduces the currency supply, contracting economic activity, and thus leading to bankruptcies.

Bankruptcies are thus an inevitable part of the system – it is designed that way!

Debt

Debt is a claim on assets and labour. Declaring bankruptcies does not “clean the slate”, but dispossesses the debtor.

Possession of everything is the objective, whether through:

  • Communism, where no-one owns anything because someone owns everything
  • Dispossession through bankruptcies, accelerated with credit contraction in “business cycles”
  • Buying up ownership of publicly traded corporations with created money, bailouts, and QE
  • Bankrupting nations and taking over their pensions, infrastructure, land, etc., through austerity measures
  • Destroying nations’ coherence and identity, and thus eroding their ability to maintain their culture and defend themselves
  • War, which is simply theft at a grand scale
  • etc.

…forcing capable, productive people into destitution and refugee camps.

– – –

Solutions range from prohibition of interest (Islam, Catholic…), precious metals based currencies (Bretton Woods…), cryptocurrencies (Bitcoin, Ethereum, Ripple…), community networks (LETS…), etc.

We are being preyed upon

We, the people, are being and have been preyed upon. Poverty is not only an issue for the impoverished – we are all victims.

1. Banking

Banking is about compound interest on debt (call it money if you like). This money is created out of nothing by private corporations (call them banx if you like) by means of nothing but bookkeeping. This is not someone else’s savings, or gold in the safe as commonly promoted (despite central banks documentation stating clearly how it is done, and empirical evidence from researchers like Richard Werner[1] proving the case).

Contrary to public perception, the bulk of today’s money supply is created and allocated by commercial banks

This money, created by bookkeeping, is issued as debt (that means a claim on the victims assets and labour (enslavement)), on which interest needs to be paid. Note that this interest is not created, and thus is paid out of the principal, reducing the money available for its intended purpose. Thus more and more debt needs to be borrowed in order to pay the interest, until the victims have nothing more to be “monetized”, leading to bankruptcy, foreclosure, dispossession, destitution and enslavement[2].

Furthermore, the interest can never be paid off. If fact unpaid interest compounds…[3] (can you believe this stuff). This exponential indebtedness is the reason corporations crush labour, and grind up the planet with pollution and externalizing costs, to keep growing in order to pay financing and stay ahead of foreclosure[4]

Contemporary predatory can be traced by to the de’ Medici’s from the 15th century, but Michael Hudson, and David Graeber[5] push the date of debt back 5,000 years, so this evil has been devastating the ingenuity and hard-work of cultures across the eons.

2. Corporations

Corporations whose only interest in us is the most work for the least pay, even if it means outsourcing to the most remote and exploited populations on the planet. Lower wage bills mean higher bonuses for CEO’s and dividends for shareholders.

Why Did Hundreds Of CEOs Resign Just Before
The World Started Going Absolutely Crazy?

In the months prior to the most ferocious stock market crash in history and the eruption of the biggest public health crisis of our generation, we witnessed the biggest exodus of corporate CEOs that we have ever seen.

What is relevant to this discussion is the question why CEO earns 10x the next person on the totem pole, and 400x the modus worker wage. It is because they belong to the small club with access to unlimited funding at fractional rates, whether they turn profits or not.

In this essay we will discuss the socio-economic roots of inequalities and the relation between the concentration of wealth and the downward mobility of the working and salaried classes.

How the Billionaires become Billionaires

3. The investment industry

The investment industry earns among, if not the, highest wages on the planet, yet produces nothing. The essence of the industry is coke’d up “brokers” cold calling victims (call them investors if you like) to sell them on the next stock being pumped so that the brokers can dump them.

How the Rich Eat the Poor and the World

Funds (hedge, mutual, etc.) have an amazing deal of high fees irrespective of performance, the vast majority performing pathetically compared to passively investing in an ETF / Index. The even have the gall to dictate how victims are allowed to withdraw, and even delay selling orders in order to suit their own benefit.

4. Tax extortion by government

Tax extortion by government who produce nothing of value or they’d be able to sell it in a free market. Some suggest that clinics, courts, schools, and works be spun off into many private companies, so that the we can cut the layers upon layers of “administrators” and “managers” sucking up two-thirds of the tax for their wages and bribery.

Even if society decides to fund healthcare for eg., that does not mean the provision needs to be attempted by bureaucrats.

Governments don’t invade (occupy, have bases) other countries to provide healthcare and education, but to tax and exploit them


[1] Can banks individually create money out of nothing? (https://www.sciencedirect.com/science/article/pii/S1057521914001070)

[2] A wage-slave, who is given just enough (modus wage in OECD countries is $30,000) to feed and house themselves and make their way back to the “plantation” the next day and month to carry on ‘till death, is no different from the slave housed and fed on the plantation.

[3]All that we had borrowed up to 1985 or 1986 was around $5 billion and we have paid about $16 billion yet we are still being told that we owe about $28 billion. That $28 billion came about because of the injustice in the foreign creditors’ interest rates. If you ask me what the worst thing in the world is, I will say it is compound interest.” President of Nigeria Olusegun Obasanjo

[4] Half the Fortune 500 companies are bankrupt zombies

[5] David Graeber – Debt: The First 5000 Years

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