A few days ago I watched the documentary ‘The money fix’. The movie starts with a very good explanation of what money is and how the monetary system works. If you haven’t seen the series ‘Money as Debt’ (1&2) that I posted about earlier, this is definitely a good place to get started. The second part of the documentary is about alterative currency systems such as the time-dollar.

All alternative currencies try to solve the same problem: we are immensely productive and yet we get a feeling of scarcity. We have huge global, regional and local problems that need to be solved but don’t get done because of a lack of money. At the same time we have millions of people that are unemployed and can’t find work. There is a problem of allocation, and money – or rather the lack thereof - is the cause.

Money will always be scarce because it is created as debt while the interest to be paid on these loans is not created (this is very well explained in this documentary). One solution is to transfer the right to create money from (central) banks to the government. The government can spend money into creation interest free and control the money supply through taxation.

This documentary goes one step further and proposes a ‘mutual credit system’. In this system money is essentially created by the people themselves. If I put effort in to the system – for example by working for one hour – I get one time dollar. The person ‘buying’ my time is one time-dollar down. When I spend that dollar the reverse is the case. People can have positive and negative balances but the sum of money in the system is always zero. Moreover, no interest is paid.

This makes for a very stable system that – according to those that have tried – creates a feeling of abundance. In my opinion this is not to be mistaken with true abundance as a perceived future by some people (amongst others Jacques Fresco of the Zeitgeist movement).

Our wants are endless. And so are – to a certain degree – human labour, energy from the sun and the power of the waves. Unfortunately this abundance is contrasted by scarcity of non-renewable resources and surface space on earth. By the nature of these resources, this scarcity will never be solved (until we enter the age of space colonisation?).

The difference with nature – which is based on abundance – is that nature takes only what it needs while humans take more than that. Human beings don’t only have needs, but also (insatiable) wants based on our fancies, fantasies and dreams. It is this that makes us human, makes life interesting, and drives our development. At the same time it makes that we will never be free from this feeling of scarcity.

As a society we have to solve the money problem in order to save our commons and redistribute the wealth available on the planet. But I fear we cannot be saved from scarcity. Maybe it is like ups and downs; you can’t have one without the other. Without scarcity we cannot be overjoyed by abundance. The challenge then, is to redistribute scarcity and abundance more equally around the world.

Well, this is all there is to say about endless economic growth....

Just read a very nice book by Sander G. Tileman titled ‘Mind over Matter, van zeepbelkapitalisme naar economie met een hart’. Yes, the book is in Dutch but it is based on a paper ‘Mind over Matter’ that is written in English and can be found here.

Sometimes you read a book that isn’t new (to you) but perfectly sums up a whole lot of thoughts wondering around your head. For me, this is such a book. In fact, in a way it is the book on Beconomics (sorry, still only in Dutch). The bottom line: we need a new paradigm of economical thought that doesn’t only focus on money and efficiency but instead a new and holistic model that is centred around the wellbeing of all. The economy as it is today cannot be fixed but needs to be replaced.

The book is not only recommended by me (tip!), but also by Herman Wijffels, Ruud Lubbers, Tex Gunning, Peter Blom and a number of others. Which makes me wonder…

In the Netherlands we now have a parliamentary commission enquiring into the causes of the financial and economical crisis. Bankers state that they didn’t see it coming and didn’t do anything wrong. The authorities looking over the banks say that they couldn’t do anything to stop it. The one thing that they all seem to agree on is that we need to continue with big financial stimulus packages and maybe a little more legislation to keep things on track. Once things have settled down, we can get ready for the next economic boom.

The point that gets me wondering is why all this questioning is done within the boundaries of the current system, while the system itself is not questioned at all. Given the fact that the influential people mentioned above support the line of thought of Tideman why doesn’t this thinking trigger a much deeper enquiry into the causes of the crisis?

Maybe nobody dares to question the fundamentals of the system now that things are finally quieting down a little. Nobody wants to rock the boat… But, we certainly have to. As Einstein noted: “Problems cannot be solved on the same level of awareness that created them”. And this is very true for the financial, economic, resource, climate and other crises that we are facing.

We need a new economic model and Tideman does a good job of pointing out what we should look at (new measures of progress) and some of the things that need to be changed. Highly recommended!

Ik heb vandaag de oproep 'Planet 1st' getekend waarin – oa door Herman Wijffels, Prins Carlos de Bourbon de Parme en Louise Fresco - gepleit wordt voor een verschuiving van onze maatschappelijke focus van Profit naar Planet. Couldn’t agree more. Hetzelfde geldt voor de voorwaarden, doelen en maatregelen die genoemd worden. Helemaal mee eens. We moeten inderdaad de reële kosten van productie doorrekenen aan de klant, ambitieuze duurzaamheidsdoelstellingen nastreven en klimaatverandering tegengaan. En toch geloof ik niet dat dit genoeg is.

Een verschuiving naar ‘Planet First’ is alleen realistisch als geld niet langer dicteert. En daarvoor moet het mondiale monetaire systeem op de schop.

In het huidige monetaire systeem komt geld alleen in omloop door het aangaan van schuld door overheden, bedrijven en particulieren. Schuld moet met rente worden terugbetaald en dat geld kan alleen opgebracht worden door het aangaan van nog meer schulden. Deze groeiende mondiale schuldenlast maakt economische groei noodzakelijk. We zijn allemaal in schuld aan de (centrale) banken die het geld hebben gecreëerd en deze schuld moet worden terugbetaald met inkomsten uit People en Planet.

De schulden van overheden, bedrijven en particulieren staan in schril contrast tot de productiviteit van onze samenleving. We voelen ons arm en bedreigd in onze welvaart maar in potentie zijn we rijker dan we ons kunnen voorstellen. We zijn productief genoeg om in al onze behoeften en veel van onze wensen te voorzien met slechts enkele uren werk per week. Door de focus op economische groei en winst produceren we meer dan we nodig hebben ten koste van mens en planeet.

De winsten van deze overproductie vloeien naar een zeer klein deel van de bevolking. De rijkste 2% van de bevolking op aarde bezit ruim 50% van de welvaart terwijl de armste 50% nog geen 1% van de welvaart in handen heeft (UN, 2000). De top 50 Wall Street bankiers verdienden in 2007 gemiddeld $590 miljoen per persoon. Tegelijkertijd zijn er miljarden mensen die van minder dan een dollar per dag moeten rondkomen. De theorie dat welvaart naar beneden vloeit (de ‘trickle-down theory) is in de afgelopen decennia volledig achterhaald door de realiteit. De rijken worden rijker, de armen worden armer en de planeet waarvan we afhankelijk zijn wordt uitgeput. Kortom: private rijkdom wordt gefinancierd met sociale armoede. The tragedy of the commons.

De enige manier om deze perverse prikkels uit het systeem te verwijderen is om het monetaire systeem fundamenteel te herzien. Kernpunt hierin is dat geld niet langer in omloop gebracht moet worden door schuld. Hiermee vervalt de noodzaak om deze schuld met rente terug te betalen en daarmee een belangrijke drijfveer van onze eindeloze drang naar economische groei.

In aanvulling van de maatregelen die worden genoemd in de oproep van ‘Planet 1st’ zou ik daarom willen pleiten voor drie ingrijpende aanpassingen in het monetaire en financiële systeem:

1) Geld moet schuldenvrij en rentevrij in omloop gebracht worden door overheden. De voordelen van geldcreatie komen hierdoor ten goede aan de gehele bevolking in plaats van enkel een kleine groep bankiers.

2) Banken kunnen alleen bestaand geld uitlenen. Dit betekent het einde van zgn ‘fractional reserve lending’ waarbij banken meer uitlenen dat ze eigenlijk hebben.

3) Er moet gestreefd worden naar een stabiel financieel/economisch systeem dat fungeert als olie in de machine van de reële economie. Casino-speculatie in alle vormen moet worden tegengegaan. De eenzijdige focus op winst (voor een kleine groep) is in directe tegenspraak met de prioriteit op mens en planeet.

Deze aanpassingen maken van geld weer een middel in plaats van een doel op zich. Het beheer van dit publieke middel wordt logischerwijs beheerd door de overheid in plaats van door banken en speculanten. Het zal van bankieren weer een saai beroep maken en de focus verleggen naar het creëren van echte waarde voor mens en samenleving. 

Two weeks ago I posted about the book 'Web of Debt' and 'Money as debt'. The more I dig into this subject the more interesting it becomes. I always thought that monetary economics was rather boring but more insight into the money system is now allowing me to link the dots between consumerism, our focus on growth, the problems of sustainability, the financial casino, etc, etc. Below is another series of 8 films (10 minutes each) about how the money system works. At point the films are a bit slow, but it is well worth watching. If you haven't watched the first series, scroll down in this blog to see that first.

The last few weeks I have been following the Icesave soap with much interest. Last year the Dutch and UK governments honoured claims worth 5 billion Euro’s to compensate for savings that were lost by citizens of both countries when the Icesave (Landsbanki) bank went bankrupt. Now they want that money back from the Iceland government.

All very logical, it was after all an Iceland bank, regulated by the Iceland authorities. When things went bad the Iceland government even took control of the bank. But then again, the UK and Dutch banking authorities gave Icesave the thumbs up as well when it aggressively entered both markets in 2007. In both countries the savings were guaranteed by national depositor protection schemes.

It is clear that the Icesave bankers failed. And so did the regulatory agencies in Iceland, the UK and the Netherlands. But can we blame the Iceland population for the billions that have gone missing? Are the fisherman, shopkeeper and truck driver from Reykjanesbaer responsible for mismanagement by a few bankers?

Still, we expect the Iceland population to pay up in excess of 12.000 euro per person to compensate for the financial mess that the bankers created. After a petition that was signed by over a quarter of the population, president Grimsson rightfully refused to sign a bill to repay these billions. This immediately evoked strong reactions from Dutch Finance Minister Bos and UK Tresury Minister Lord Myners. Paying up is even linked to Iceland joining the EU. Fortunately for them, the Iceland population will have a final say on the matter in a March 6th referendum.

If I were an Icelander I would definitely vote against the bill. Why should I feel more responsible for this financial mess than the global banking industry? What about the bankers of Goldman Sachs, JP Morgan Chase and Morgan Stanley that are expected to cash in around 28.5 billion dollars in bonuses over 2009? Why don’t we hold the international banking community accountable instead of 316.960 Icelanders that have nothing to do with the matter? OK, maybe subtract 10 from that number.

I suppose it is easier to pick a fight with Iceland than with these big powerful international banks. The treasury ministers are too close with the bankers to even propose such a thing. Furthermore, there is no legal ground whatsoever to put it into effect. But all of that doesn’t make it any less logical. Or honourable.

I wonder what would happen if we - in the Netherlands and the UK - would hold a referendum on who should pick up the tab of the bailout of Dutch and UK savers. Would there be support for a bill to make the bankers use future profits to compensate our governments instead of the Iceland population?

Critics will say that such a bill is unrealistic. Could well be. But expecting the Iceland population to pay up could be just as unrealistic. We will know after the Iceland referendum. Whatever the outcome, the system of privatising profits in the pockets of bankers and socialising losses through government support has to be stopped. There is no logic behind such a system. At some point the population will start to rebel, and the Icelanders may well be the first.

Given the hundreds of billions of public funds that have gone into bailing out the banks it is incredible that the whole discussion on bank support hasn’t been much more aggressive. Many people appear (want?) to believe that the financial system has been healed and that the economy is ready to boom again. We can continue where we left off two years ago! This assumption is false because of the simple fact that the underlying system is seriously flawed. Fractional lending, the moral hazard of governments bailing out banks, derivative trading worth many times the real economy, runaway speculation, and banks too big to fail are just a few problems woven into the system.

I hope that an Iceland ‘Nei’ on the 6th of March will trigger a bigger debate on who is responsible and who needs to pay up. The Iceland Vikings will be like that little village in Gallia that stood up to the mighty Roman Empire. I just hope the Icelanders have that same magic potion…

In my last post I wrote about the book 'Web of Debt'. Definitely a tip. I found a very accessible film (5 parts) on YouTube that tells the same story. A definite must see. Although the movie tells a story that was never taught to me in school or university I have the feeling that it is in fact correct. If you think it is not - or works differently in Europe or other parts of the world - let me know.

In the past few years I have read many books but ‘Web of Debt’ has by far been the most interesting. A must read although it does raise a lot of questions.

It is presented as revealing ‘the shocking truth about our money system’ and what it tells us is so contrary to what we have been taught that is….well,…. just very hard to believe! I feel a bit like the kid that has just been told that Santa Claus doesn’t exist. There seem to be a few things that the teachers left out in University. In fact, they weren’t even in the book.

After finishing the book this weekend two questions remained in my head:

1) Is this true?

2) And if it is true, is it also true for other countries than the USA (the book is mostly about the US banking system and the US Federal Reserve).

When I started looking around on the internet I was stuck with a third question:

3) Why is there so little debate (noise!) about this book and the story it tells?

That could be because it is simply not true. But then you would expect a whole load of authors pointing out all that is wrong with the book. There is some debate on Amazon that is interesting but it still doesn’t answer my questions above.

I have recommended the book to a couple of friends and invited them to a book discussion. Within our network we hope to find somebody (possibly somebody working at the Dutch Central Bank or an Economics Professor) to discuss the book.

Based on some of the (negative) reviews I think that what we will find is that most of the problem analysis of the book is uncontested. Even critics of the book state that the fractional banking system is seriously flawed. I am very curious about the truth regarding the alleged ability of banks to create money by ‘sleigh of hand’. The solution put forward by the author to have the government spend money into circulation could just be a matter of belief. We would have to test – do it – to know for sure.

The book is a must read because even if you don’t agree with the solutions, it is still a very good analysis what is wrong with our money system. After reading this book there is no doubt in my mind that we haven’t seen the worst of the financial crisis. It is time to seriously redesign our economic and financial system based on the reality of the world today.

More about that in my paper on Beconomics. At the moment it is still only in Dutch but I am working on the Beconomics Manifesto. In English. To be continued…