Up until the 1970s, banking was known as a dull, sober profession. Banks accepted deposits from savers, and made loans from these "secured deposits"- loans to local businesses, loans for mortgages, loans for other purposes. All such loans went to "solid citizens", that is, citizens who could provide "collateral". "Collateral" meant that if you did not repay your loan, you had some other property the bank could sell to get its money back. In those days, it was customary for people who bought a house to make some significant down payment (say, 25%) from their own savings (further demonstration that they were likely to be "credit worthy")
The magic of "fractional reserves" meant that the bank earned interest on multiples of its original deposits, and eventually the loans on the mythical money were repaid in real money as well, adding to the "real" deposits. Profits were thus reliable, and large. Very few banks of this traditional sort now remain.
Traditional bankers represented themselves as being "advisors to their clients" This actually meant that they had a monopoly on information about the financial markets. When, with the advent of computers, it became possible to access such information independently, many giant corporations began to bypass "banking services". For example, General Motors began to issue "commercial paper". They borrowed large amounts of money at low interest for the short term. They loaned small amounts to large numbers of car buyers for the long term. Lenders were individual or organizations with very large amounts of money which they could park in a safe place overnight, or for a week or two The owners of large sums earned interest rather than having such sums "remain idle". General Electric took itself entirely out from under the need to use any bank, and so did many other powerful corporations.
In the face of this brutal new competition, traditional banks faced desperate straits. By 1980, one third of US banks had disappeared- merged or taken over. They fired 37 % of their employees between 1983 and 1993, replacing them with automated tellers. Loss of bank jobs has accelerated since, and this does not take into account the second wave of innovation which struck...the internet! Changes in legislation allowed the remaining banks to seek other ways of staying in business, and the best thing they found was the credit card.
Credit cards offer loans at very high rates, and don't pay much attention to the capacity of card holders to pay. Such interest income has become the chief income source for the banks. In the summer of 1998, Congress passed laws making declaration of personal bankruptcy more difficult. Economics professor Lawrence Ausubel of the University of Maryland documented the parallel between numbers of credit card solicitations and numbers of personal bankruptcies. (Congress did nothing to limit the solicitations.) In 1997 there were an average of 9 credit card solicitations per US household per 3 weeks. Unprecedented levels of personal bankruptcies in the US even prior to our recent financial collapse suggest that future growth in profit for the banks will not come from this direction. The growth in international use of credit cards will provide them with a breathing space.
In any case, depositing one's money in a bank (for the kind of trivial interest available from a bank), has become quite unwise. A look at long term inflation rates shows that the US dollar lost 50% of its value (maybe more) from WW2 to 1970 and a further 75% between 1971 and 1996. There has been some recent pause in this dire downward trend. For a while, real estate held up. There are bonds, there is the stock market. Whatever is one to do, who is in the happy position of having accumulated wealth? Wherever is one to put it safely?
Tuesday, December 7, 2010
Saturday, November 27, 2010
Fiat money- "so simple, the mind is repelled"- a wonderful story
I am grateful for having a great education, and I have several degrees that are supposed to demonstrate my learning. I did always like a good story and that's what still appeals to me about history. I learned the history of Canada, the history of Rome, the history of the global navigators, and the history of the world, but nobody ever taught me the history of money. I did underline an explanation in John Kenneth Galbraith's wonderfully entertaining book, "Money: whence it came, where it went" when I got my copy in 1976. It occurs in the same chapter as his famous line, "The process by which banks create money is so simple the mind is repelled", but I never really understood what he meant. Bernard Lietaer in his second chapter writes the first story of money that has ever hung together for me.
He tells that the earliest writings we have come from 3200 BC Sumeria . These records describe bank deposits, transactions in foreign currencies, and loans with and without collateral...apparently such concepts were already fully understood. The earliest examples of paper currency instead of metal coin arose in China in the 9th century, and by the end of the 13th century, Kublai Khan's paper money was accepted from China to the Balkans. Paper money took another 4 centuries to displace gold, copper and silver coin in Europe.
In 13th century Italy, goldsmiths had strongboxes and would issue a receipt for storing your gold and charge a small fee for the service. You could present your receipt for the gold coin when you needed it, but since there was considerable danger of being knocked on the head for your coin, wise practice became to pay with the receipt instead. Thus paper as money made its way to the West. It became so unusual for the gold to be removed from its safe nest, that intelligent goldsmiths began to "loan out extra gold"...actually, who could tell whether the gold belonged to the smith or to some depositor? The smith was supposed to be a sober reliable sort- when he loaned you gold, and issued a receipt for it (with the usual service charges), he was pioneering the fractional reserve system.
This same system, still practiced by our banks, found our financial institutions with their hands in the cookie jar during the meltdown of 2007-2009, even though no actual gold is now involved. It is also the magic in how banks create money. (After 5 years of Latin study, I can confidently translate "fiat" as "make it so", per Captain Jean Luc Picard of the Starship Enterprise.)
The individual goldsmiths of 13th century Italy coalesced into the earliest bankers, while the feudal powers coalesced into national states. Rulers and banks worked out a mutually satisfactory arrangement, whereby the bank got the privilege of issuing "legal tender" in return for a promise to always make available sufficient funds for the needs of the government. This is the system universally in effect to this day. (The king of Sweden needed the money for his wars and was the first to work out the details to everyone's liking in 1668.)
In the US, it is the Federal Reserve which is the central bank. Treasury bills are requests for a loan from the Federal government. The Republic offers to pay you interest on your money, if you will please provide a loan. This interest is of universal satisfaction, and thus US treasury bills are considered a worthwhile investment by the domestic investing class, as well as by foreigners having money to store. If any treasury bills remain unsold at auction, they must be purchased by the Federal Reserve as part of the deal. The government deposits its checks from the Federal Reserve (and from everyone else...Goldman Sachs, me, your pension fund, and the Chinese government) It pays its employees, who in turn deposit the pay wherever they bank.
Every bank is allowed to issue loans to you and me, based it is hoped, on our demonstrating an ability to repay the loan. The key, however, is that they don't need to already "have" the money at all. They create it magically, out of nothing, just by saying that it exists, and because the bank says it's there, it shows up as a credit in your account. Recently, we know, they got carried away, and started giving out loans whether or not people could pay, (because they were craftily passing the risk along through innovative financial derivatives...but that is another story)
Now, isn't that worth knowing? Do check out the website. Everything idea I wanted to share from the book, as I began to understand it, is found there. I'm going to keep writing anyway, for the sheer pleasure of it! For everyone to understand : "Make it so!"
He tells that the earliest writings we have come from 3200 BC Sumeria . These records describe bank deposits, transactions in foreign currencies, and loans with and without collateral...apparently such concepts were already fully understood. The earliest examples of paper currency instead of metal coin arose in China in the 9th century, and by the end of the 13th century, Kublai Khan's paper money was accepted from China to the Balkans. Paper money took another 4 centuries to displace gold, copper and silver coin in Europe.
In 13th century Italy, goldsmiths had strongboxes and would issue a receipt for storing your gold and charge a small fee for the service. You could present your receipt for the gold coin when you needed it, but since there was considerable danger of being knocked on the head for your coin, wise practice became to pay with the receipt instead. Thus paper as money made its way to the West. It became so unusual for the gold to be removed from its safe nest, that intelligent goldsmiths began to "loan out extra gold"...actually, who could tell whether the gold belonged to the smith or to some depositor? The smith was supposed to be a sober reliable sort- when he loaned you gold, and issued a receipt for it (with the usual service charges), he was pioneering the fractional reserve system.
This same system, still practiced by our banks, found our financial institutions with their hands in the cookie jar during the meltdown of 2007-2009, even though no actual gold is now involved. It is also the magic in how banks create money. (After 5 years of Latin study, I can confidently translate "fiat" as "make it so", per Captain Jean Luc Picard of the Starship Enterprise.)
The individual goldsmiths of 13th century Italy coalesced into the earliest bankers, while the feudal powers coalesced into national states. Rulers and banks worked out a mutually satisfactory arrangement, whereby the bank got the privilege of issuing "legal tender" in return for a promise to always make available sufficient funds for the needs of the government. This is the system universally in effect to this day. (The king of Sweden needed the money for his wars and was the first to work out the details to everyone's liking in 1668.)
In the US, it is the Federal Reserve which is the central bank. Treasury bills are requests for a loan from the Federal government. The Republic offers to pay you interest on your money, if you will please provide a loan. This interest is of universal satisfaction, and thus US treasury bills are considered a worthwhile investment by the domestic investing class, as well as by foreigners having money to store. If any treasury bills remain unsold at auction, they must be purchased by the Federal Reserve as part of the deal. The government deposits its checks from the Federal Reserve (and from everyone else...Goldman Sachs, me, your pension fund, and the Chinese government) It pays its employees, who in turn deposit the pay wherever they bank.
Every bank is allowed to issue loans to you and me, based it is hoped, on our demonstrating an ability to repay the loan. The key, however, is that they don't need to already "have" the money at all. They create it magically, out of nothing, just by saying that it exists, and because the bank says it's there, it shows up as a credit in your account. Recently, we know, they got carried away, and started giving out loans whether or not people could pay, (because they were craftily passing the risk along through innovative financial derivatives...but that is another story)
Now, isn't that worth knowing? Do check out the website. Everything idea I wanted to share from the book, as I began to understand it, is found there. I'm going to keep writing anyway, for the sheer pleasure of it! For everyone to understand : "Make it so!"
Tuesday, November 23, 2010
Creative Solutions
How are we ever going to fund health care given our aging populations? The "funding of health care" is supposed to be one of the straws that will finally break the camel-back of the economy. After forty years as a family doctor,the most effective health care I have seen was not the most expensive and high tech, even though it is wonderful to have such things to fall back on.
In 1991 Tsutoma Hotta had an idea for addressing such costs as a retirement project. He created the private Sawayaka Institute of Wellbeing. It issued "personal care vouchers" good for an hour of service, and 100 non-profit organizations signed on to accept such vouchers ("Fureai Kippu") for their services. Different services had different hourly values, so for example, helping an elder with his bath was valued as representing a higher time value doing his shopping or cooking. It is expanding and getting support from the government.
At about the same time, in New York City, Elderplan a not-for--profit insurance company with the motto "a broken towel rack to-day is a broken hip tomorrow", began to offer minor repair services payed for in "Time Dollars". This proved so successful, it came to accept them for a quarter of its work. (Time Banking, was created in the US by Edgar Cahn, and it too is expanding)
In both of these experiments, the elderly clients reported their preference for services offered this way, saying the care givers were more attentive. In Japan, generous tax supported social services are already available, so the volunteer care givers were complementary to the system. Japanese who help old or sick people "bank" the time they give to be used in case they later get sick and need help themselves, or right away for the care of elderly relatives who live at a distance.
We hear a good deal about school bullying, and the response of many communities to "get tough with offenders". A recent NY Times article reported on an alternative approach. A parent (mother or father) and baby spend some time in the classroom in a program called "Roots of Empathy": children exposed to the parent and baby became less mean to each other.
Maybe we can achieve certain socially favorable ends with fewer official rules, taxes, & bureaucracy than we might ever have imagined possible.
In 1991 Tsutoma Hotta had an idea for addressing such costs as a retirement project. He created the private Sawayaka Institute of Wellbeing. It issued "personal care vouchers" good for an hour of service, and 100 non-profit organizations signed on to accept such vouchers ("Fureai Kippu") for their services. Different services had different hourly values, so for example, helping an elder with his bath was valued as representing a higher time value doing his shopping or cooking. It is expanding and getting support from the government.
At about the same time, in New York City, Elderplan a not-for--profit insurance company with the motto "a broken towel rack to-day is a broken hip tomorrow", began to offer minor repair services payed for in "Time Dollars". This proved so successful, it came to accept them for a quarter of its work. (Time Banking, was created in the US by Edgar Cahn, and it too is expanding)
In both of these experiments, the elderly clients reported their preference for services offered this way, saying the care givers were more attentive. In Japan, generous tax supported social services are already available, so the volunteer care givers were complementary to the system. Japanese who help old or sick people "bank" the time they give to be used in case they later get sick and need help themselves, or right away for the care of elderly relatives who live at a distance.
We hear a good deal about school bullying, and the response of many communities to "get tough with offenders". A recent NY Times article reported on an alternative approach. A parent (mother or father) and baby spend some time in the classroom in a program called "Roots of Empathy": children exposed to the parent and baby became less mean to each other.
Maybe we can achieve certain socially favorable ends with fewer official rules, taxes, & bureaucracy than we might ever have imagined possible.
Monday, November 22, 2010
How deeply unconscious are we about money?
A better question might be, "how deeply unconscious are we in general? Looking at my own life, the answer seems to be,"pretty deeply". I took 3 weeks to change the password for this blog (which I had lost). It turns out to be simple enough, but it was unfamiliar! Oh the stress of the new and unfamiliar! People yearn for an earlier and simpler time. Except, in those earlier times, it never did seem that simple either. Bernard Lietaer suggests that standing in the way of the creation of "sustainable abundance", apart from the natural opposition of powerful minorities who benefit from the current system, lies a more important impediment: that most people are ignorant of the nature and working of the money system. We are deeply immersed in it, and deeply unconscious about it.
Last spring during Landmark Education's annual Conference on Global Transformation, as the meltdown of the global financial system was being topped by the mini-May-market crash, a session promised to discuss "creating possibilities in the economy." I showed up early, thinking there would be standing room only. Hardly anyone showed up...the only other woman who came was the wife of the moderator. The men were deeply familiar with bonds, interest rates, credit default swaps, foreign exchange markets, and so forth, but they didn't seem any more aware of how money gets created than the people on my street. They had the same question about where the money was going to be "found" to deal with the social goals they wanted. We are accustomed to starvation that continues alongside a sufficient food growing capacity, to unemployment that persists in the face of plenty of work that needs doing and plenty of manpower. We "just don't have enough money" to pay for really fine general education or comprehensive and adequate healthcare. We don't know that parallel, alternative money systems do exist that can handle these matters without increasing taxes or regulations! I didn't know how to recapture my password, either.
Very recently, a number of offerings suggest these ideas may be finding their way into the public space:
Bernard Lietaer has an accessible website
(perhaps that makes my blog here unncessary, but I will carry on with it anyway, for the sheer pleasure it gives me)
*A documentary film "The Money Fix" (easy to google it)
*Last week's PBS documentary "Fixing the Future"
The three great traditional taboos ("the great unconscious that runs the show") are sex, death, and money, In the spirit of full disclosure, I must add that at the same time as the money workshop was being held, a concurrent session dealt with orgasm....! That was standing room only.
Last spring during Landmark Education's annual Conference on Global Transformation, as the meltdown of the global financial system was being topped by the mini-May-market crash, a session promised to discuss "creating possibilities in the economy." I showed up early, thinking there would be standing room only. Hardly anyone showed up...the only other woman who came was the wife of the moderator. The men were deeply familiar with bonds, interest rates, credit default swaps, foreign exchange markets, and so forth, but they didn't seem any more aware of how money gets created than the people on my street. They had the same question about where the money was going to be "found" to deal with the social goals they wanted. We are accustomed to starvation that continues alongside a sufficient food growing capacity, to unemployment that persists in the face of plenty of work that needs doing and plenty of manpower. We "just don't have enough money" to pay for really fine general education or comprehensive and adequate healthcare. We don't know that parallel, alternative money systems do exist that can handle these matters without increasing taxes or regulations! I didn't know how to recapture my password, either.
Very recently, a number of offerings suggest these ideas may be finding their way into the public space:
Bernard Lietaer has an accessible website
(perhaps that makes my blog here unncessary, but I will carry on with it anyway, for the sheer pleasure it gives me)
*A documentary film "The Money Fix" (easy to google it)
*Last week's PBS documentary "Fixing the Future"
The three great traditional taboos ("the great unconscious that runs the show") are sex, death, and money, In the spirit of full disclosure, I must add that at the same time as the money workshop was being held, a concurrent session dealt with orgasm....! That was standing room only.
Saturday, October 30, 2010
The last two mega-trends
In previous posts I looked at two of the four inexorable mega-trends Bernard Lietaer sees currently bearing down on us : 1) the aging of global population, and 2)a revolution in information technology. These two issues leave us with two questions: how are we going to care for the increased needs of aging populations, and how can we sustain ourselves if our labor is no longer needed by the corporations for the making of stuff?
The final two giant converging trends are
-3) climate change with loss of biodiversity, and
-4) instability of the global financial system.
The final two giant converging trends are
-3) climate change with loss of biodiversity, and
-4) instability of the global financial system.
3) As I write this, a UN conference on biodiversity has just created something called the Nagoya Protocol. Representatives from 198 countries decided they would work to cut the current extinction rate by at least half by 2020. The goals include protecting 17 percent of the world’s land areas and 10 percent of its oceans. Scientists predict that the earth is losing animals and plants 100 to 1,000 times the historical average, according to The Sydney Morning Herald. Also under the Nagoya Protocol, the U.N. conference delegates decided that rich and poor countries would share the benefits of resources like medicinal plants.
The assumption that climate change and the mass extinction of species is a large and growing problem is a matter of widespread discussion. Some folk prefer to thing that humanity has nothing to do with causing it, while others grieve the whole thing has already gone so far that we are lost. No one is in favor of climate disaster, whether or not they think it is coming upon us. Lietaer suggests a useful "money" question in this area is "How do we resolve the conflict between the need for long-term planning, which would be necessary for projects in sustainable development, such as reforestation, and the short-term thinking which dominates our investment universe and forces even the most enlightened managers to focus on the next quarter's earnings?"
4)The fourth mega-trend bearing down upon us was a shocking novelty to me. I had never given much thought to paying interest on loans (which I avoided) or earning interest (which I tried to do). However, our financial system itself turns out to be inherently unstable and unsustainable, as well as a fairly recent invention of history. The past 25 years have witnessed a series of ever larger and more geographically extensive financial crises. This book was written before the economic melt-down of 2008. The hubris of world capitalism was still unassailed- only Latin Americans, Russians, southeast Asians, "others of all sorts" had until then been affected. However, the events of 2008 engulfed even the U.S. and Europe.
Lietaer points out that the international flow of money has grown beyond the power of even America, the largest and most powerful of national states, to control. He asks how we individuals and small communities are ever to protect ourselves from such rampaging financial forces?
I like this book because it is encouraging. It seems to me that listening to the daily news could put one into a permanent hopeless gloom. Next time I will finish his first chapter with thoughts on creating a sustainable future- that is the subtitle of the book: "creating new wealth, work, and a wiser world"!
Friday, October 22, 2010
Chapter One (part two)
Bernard Lietaer calls the first chapter of this book "Money-the source of all possibility". It sets forth four mega-trends that are converging in our time.
1) the "age wave"
2) monetary instability
3) the information revolution
4) climate change with extinction of biodiversity.
He asks a money question arising from each of the mega-trends.
In my last post, I reviewed what he sees as mega-trend #3 " the revolution in information technology". All the stuff we are able to consume takes ever fewer hands to produce. Our financial system is set up that people need wage money to buy the essentials for life. The question arising from this mega-trend is what are we to do in a system when so many of us are not needed for production, while we still need the wages to get by?
Now look at the first mega-trend: the inexorable aging of the world's population. For 99% of the history of the human species, our life expectancy was about 18 years. In 1889, Otto von Bismarck introduced a retirement plan for German workers reaching 65 years of age. At the time, life expectancy for the average Prussian was 45 years. In Florida, Italy, and Japan today one in five people is 65 or older. Two thirds of the those who have ever made it to age 65 in all of history are alive today. If indeed money is the source of all possibility, our prevailing financial system isn't designed to do a good job supporting those who are not engaged in it.
Looked at in the context of history, or from the context of traditional community, our system is more than a little strange. Was there ever another place or time when everybody was expected to labor for wages while so much important work remained undone? The money question that arises from this mega-trend is like the last one. Productivity success puts growing numbers out of work. Successes in education, medicine and public health have allowed an enormous extension of our life span. How do we provide a decent life for so many aging people?
One way or another, these four converging mega-trends ensure that the world of 2020 may be hard to recognize. However it turns out, we are creating it with daily choices, largely unconscious of what is happening, how it came to be, and what we can do about it. Although we are six billion, we think one by one, usually in terms of what one alone can do. Perhaps one alone cannot do much, but for better or worse, we are in this together and the work of the moment may be to learn how to talk to each other respectfully and listen for good ideas in unexpected places. Also, if money really is the source of all possibility, best to understand how it works.
Next time I'll look at the growing instability of the financial system, which is the fourth of the great mega-trends.
1) the "age wave"
2) monetary instability
3) the information revolution
4) climate change with extinction of biodiversity.
He asks a money question arising from each of the mega-trends.
In my last post, I reviewed what he sees as mega-trend #3 " the revolution in information technology". All the stuff we are able to consume takes ever fewer hands to produce. Our financial system is set up that people need wage money to buy the essentials for life. The question arising from this mega-trend is what are we to do in a system when so many of us are not needed for production, while we still need the wages to get by?
Now look at the first mega-trend: the inexorable aging of the world's population. For 99% of the history of the human species, our life expectancy was about 18 years. In 1889, Otto von Bismarck introduced a retirement plan for German workers reaching 65 years of age. At the time, life expectancy for the average Prussian was 45 years. In Florida, Italy, and Japan today one in five people is 65 or older. Two thirds of the those who have ever made it to age 65 in all of history are alive today. If indeed money is the source of all possibility, our prevailing financial system isn't designed to do a good job supporting those who are not engaged in it.
Looked at in the context of history, or from the context of traditional community, our system is more than a little strange. Was there ever another place or time when everybody was expected to labor for wages while so much important work remained undone? The money question that arises from this mega-trend is like the last one. Productivity success puts growing numbers out of work. Successes in education, medicine and public health have allowed an enormous extension of our life span. How do we provide a decent life for so many aging people?
One way or another, these four converging mega-trends ensure that the world of 2020 may be hard to recognize. However it turns out, we are creating it with daily choices, largely unconscious of what is happening, how it came to be, and what we can do about it. Although we are six billion, we think one by one, usually in terms of what one alone can do. Perhaps one alone cannot do much, but for better or worse, we are in this together and the work of the moment may be to learn how to talk to each other respectfully and listen for good ideas in unexpected places. Also, if money really is the source of all possibility, best to understand how it works.
Next time I'll look at the growing instability of the financial system, which is the fourth of the great mega-trends.
Sunday, October 17, 2010
A sustainable future? What jobs?
In the first chapter of this book, Bernard Lietaer asserts that four gigantic trends are converging in the next few years. Our reactions to them will determine whether we create wise growth and a sustainable future, or not. The four trends are global aging of populations, instability of the world financial system (he wrote this in the nineties!), climate change, and the revolution in information and communications. I'll devote a blog to each of the four.
Since the financial collapse of 2008, there is over 9% unemployment in the US. Depending on how that is calculated, some people say the true figures are closer to 17% Once upon a time, unemployment was a problem for "third world" countries, but it's not only them any more. Arguments rage about "outsourcing" by corporations of "our" jobs to southeast Asia. Companies are able to get the work done abroad more cheaply than it can be done by Americans, Europeans, and the citizens of other comfortably developed countries.We seem to be half asleep to the results of our ongoing revolution in information and communication (computers and the internet). Output of businesses has been multiplied, jobs have not. In the twenty years before William Greider wrote "One World: Ready or Not" in 1997, he reported that the world's 500 largest enterprises had increased their production 700 times while reducing employment.
In the early twentieth century, many economists predicted that multiplication of productivity by automation would lead to a world of general leisure. A twenty hour work week would be sufficient for the production of all humankind's need for stuff. Medieval serfs worked less than four hours a day. In our time, only the remaining "hunter-gatherer" societies match that level of leisure. Mostly these days we have workaholics and the unemployed. When engines replaced horses for power at the beginning of the twentieth century, the horses became rare. To-day less manpower is needed to make all the stuff we can ever want. There may not be enough jobs, but there's no shortage of work that could be done. Edgar Cahn, founder of Time Banking, says "We've got what we need if we use what we've got". Bernard Lietaer says that by becoming conscious about money, we can make wiser choices. Sounds like that's worth checking out.
Since the financial collapse of 2008, there is over 9% unemployment in the US. Depending on how that is calculated, some people say the true figures are closer to 17% Once upon a time, unemployment was a problem for "third world" countries, but it's not only them any more. Arguments rage about "outsourcing" by corporations of "our" jobs to southeast Asia. Companies are able to get the work done abroad more cheaply than it can be done by Americans, Europeans, and the citizens of other comfortably developed countries.We seem to be half asleep to the results of our ongoing revolution in information and communication (computers and the internet). Output of businesses has been multiplied, jobs have not. In the twenty years before William Greider wrote "One World: Ready or Not" in 1997, he reported that the world's 500 largest enterprises had increased their production 700 times while reducing employment.
In the early twentieth century, many economists predicted that multiplication of productivity by automation would lead to a world of general leisure. A twenty hour work week would be sufficient for the production of all humankind's need for stuff. Medieval serfs worked less than four hours a day. In our time, only the remaining "hunter-gatherer" societies match that level of leisure. Mostly these days we have workaholics and the unemployed. When engines replaced horses for power at the beginning of the twentieth century, the horses became rare. To-day less manpower is needed to make all the stuff we can ever want. There may not be enough jobs, but there's no shortage of work that could be done. Edgar Cahn, founder of Time Banking, says "We've got what we need if we use what we've got". Bernard Lietaer says that by becoming conscious about money, we can make wiser choices. Sounds like that's worth checking out.
Wednesday, September 29, 2010
The Future of Money- Sept 29,2010-the introduction....
After all the time we spend getting, keeping, and spending money, Bernard Lietaer, my hero and the author of "The Future of Money" asks,
"How many of us really know what it is, and where it comes from?
Here are the other questions he sets out to answer:
Why is productive work so scarce?
Why do we seem to be so short of time, when growth in technology and productivity was supposed to create an age of leisure?
Why is it ever more difficult to pay for good education for our children and for good health care?
Why is it that the more we "make it" financially, the less we hve a sense of real community?
Why is long term sustainability not a high priority in our society?
Why are so many people obsessed with having money?
Why is the global financial system increasingly turbulent and what does that mean to regular folk?
This book sets out to make clear the way money really works in our time, and a history of how it got that way. He belongs to no particular school of economics but sets out to demonstrate how different monetary systems impact the way people interact in different societies, the societies themselves, and the physical world on which we all depend. He is interested in what is possible beyond greed and scarcity. He proposes that there is another way, and that each of us can take it! There have been monetary innovations "road-tested" in various places that actually provide effective solutions for full employment, education and health care without adding taxes or burdensome interference from central authorities, and I'm with him that we can do with becoming aware of them!
This morning in Seattle, meditating on what really matters to me as I age, I watched salmon making their way up a fish ladder. The builders of the fish ladder included a viewing chamber along the wall of the highest compartment in this route designed to allow the spawning fish to get around a dam. It is late in the spawning system, but this year was an especially large migration, and there were about ten mature salmon in the viewing compartment. It was near low tide, so the speed of the water flowing downstream was great. The huge, powerful old salmon were nearly immobile in the flow, their great grey bodies working just to stay in place. I had no idea how difficult it is for them to get back up the river to their original streams. Every so often a young small salmon would leap into the tank heading in the opposite directions, out to the sea and the full life of salmon in the ocean. They were beautiful and shiny compared to the scarred behemoths powering upstream.
Among us humans, old people usually have the money and the power (if not the muscles), and if we have not given up on life, usually some intent to leave a legacy. We've done our spawning (if we were going to do any) but after the legacy work, we die too. To-day I am inspired by the salmon not to give up on working for a world where everyone's needs are met, and everyone's gifts are needed.
"How many of us really know what it is, and where it comes from?
Here are the other questions he sets out to answer:
Why is productive work so scarce?
Why do we seem to be so short of time, when growth in technology and productivity was supposed to create an age of leisure?
Why is it ever more difficult to pay for good education for our children and for good health care?
Why is it that the more we "make it" financially, the less we hve a sense of real community?
Why is long term sustainability not a high priority in our society?
Why are so many people obsessed with having money?
Why is the global financial system increasingly turbulent and what does that mean to regular folk?
This book sets out to make clear the way money really works in our time, and a history of how it got that way. He belongs to no particular school of economics but sets out to demonstrate how different monetary systems impact the way people interact in different societies, the societies themselves, and the physical world on which we all depend. He is interested in what is possible beyond greed and scarcity. He proposes that there is another way, and that each of us can take it! There have been monetary innovations "road-tested" in various places that actually provide effective solutions for full employment, education and health care without adding taxes or burdensome interference from central authorities, and I'm with him that we can do with becoming aware of them!
This morning in Seattle, meditating on what really matters to me as I age, I watched salmon making their way up a fish ladder. The builders of the fish ladder included a viewing chamber along the wall of the highest compartment in this route designed to allow the spawning fish to get around a dam. It is late in the spawning system, but this year was an especially large migration, and there were about ten mature salmon in the viewing compartment. It was near low tide, so the speed of the water flowing downstream was great. The huge, powerful old salmon were nearly immobile in the flow, their great grey bodies working just to stay in place. I had no idea how difficult it is for them to get back up the river to their original streams. Every so often a young small salmon would leap into the tank heading in the opposite directions, out to the sea and the full life of salmon in the ocean. They were beautiful and shiny compared to the scarred behemoths powering upstream.
Among us humans, old people usually have the money and the power (if not the muscles), and if we have not given up on life, usually some intent to leave a legacy. We've done our spawning (if we were going to do any) but after the legacy work, we die too. To-day I am inspired by the salmon not to give up on working for a world where everyone's needs are met, and everyone's gifts are needed.
Monday, September 27, 2010
A year long project begins
"The Future of Money" is the title of a book I want all my friends to read. Ordinarily I would be buying and gifting copies, but strangely, that turns out not to be possible. My efforts to contact the author have been ineffectual, so as I reread it for the fourth time, I am going to make notes and share them on this blog. If you can get hold of a copy, I recommend you read the real book itself. My blog will naturally reflect the limits of my understanding of this stuff, and I am certainly no expert, just a fan. I haven't been this passionate for anything since I stood on the street waiting to buy tickets for a Beattles concert in Montreal in the sixties! But what could be more gripping a topic than money? Along the way comes what the heck people mean by "complementary/alternative currency"...which turns out to be pretty exciting stuff! How about systems that handle a lot of our needs without extra taxes and regulations?
On the board of the Global Abundance Alliance, three years ago we were beginning to look systematically at "what is a gift economy?" We had read Lewis Hyde's book "The Gift"- my first exposure to the idea that what we know as "the economy" which seems so overwhelmingly important, is in fact a subsidiary section of the give-and-take in humanity, which somehow we have collectively endowed with nearly divine importance. Helen Kessler recommended I read "The Future of Money" by Bernard Lietaer
Helen had the paperback on her shelf, but she lives on the other side of the country. Imagine my surprise when I tried to buy online, to discover that is was selling for $150 a copy! A paperback copy!
I got the book on an interlibrary loan. When it arrived, there was a note to say I couldn't take it out of the library, but could only read it on the premise. So I travelled back and forth for the week or so it took to read 500 pages, taking notes and exclaiming over the story to anyone who would listen, and getting to know the local librarians really well. Meanwhile, my son found a copy in Spanish, fortunately one of my languages, for a mere $50, so I have actually now been able to own and reread it. If I miss the point in my translation, the fault is all mine, and I apologize to the author.
In his preface to the 2005 Spanish edition published in Argentina, Lietaer says he wrote the book in the 90's as a warning that our monetary system was dangerously fragile. He hoped to raise people's consciousness about money and the financial system so as to stimulate the creative alternatives that would cushion the blow of a great financial crisis for as many people as possible. He wanted more people to understand the existence of complementary financial systems that had actually been road tested around the world by people in the countries affected by 86 financial crashes of the previous 20 years.
People who have lived through these preliminary experiences of financial system collapse have pioneered models of mutual credit arrangements that we all can use now that his predictions have unfortunately been fulfilled in the crash of 2008 and subsequent "Great Recession" Such systems are in place in Argentina, Germany, Switzerland, & Austria
His predictions of financial system collapse centered on the role of the US dollar as what's called "an international reserve currency", meaning that dollars have been used all over the world and circulate way beyond the boundaries of any national control. In 2004 the US was consuming 6% more than it produced. In that same year, the International Monetary Fund expressed criticism of the US for the first time in history. The problem was massive, unsustainable levels of debt both by government and industry. If the Chinese and Japanese holders of US dollars stopped wanting them, if it was thought that Americans could no longer repay their enormous loans, there was risk of a sudden rapid fall in the value of the US dollar, on top of the steady erosion of value they were already experiencing .
In the event, the crash that actually occurred came not from government default, but from the unsustainable debts incurred by private financial institutions operating unregulated, internationally..... making ever wilder loans in the real estate market. In fact, the Chinese and Japanese have been gritting their teeth as their US investments plumetted. Apparently they are taking a longer view, not calling in their debts. I suppose they expect we will all work this out together somehow. Lietaer sees our actual financial troubles as a long term opportunity to put in place what it will take to have sustainable abundance. The mutual credit arrangements he champions will need to be democratically controlled, transparent, and regulated against fraud in the same way as official money needs to be.
I am writing this on a train, riding from Washington DC to Raleigh, NC, where I live. It will take me 6 hours- an hour longer than it would take me to drive. There is a lot more leg room than I am accustomed to on airplanes. My daddy was a railroad man, and I rode on a lot of trains as a child, but I have not been on one in years. I had forgotten how large the windows are, and how the land flashes by so close you can almost feel the trees. There are rivers, and fields, cement factories and trailer parks, farms and towns. I am moved by the beauty of this forgotten America. I like the look of my fellow passengers, too. They are not so glossy as the ones on TV.
I think we have been systematically undervaluing and ignoring the things that matter in life- not so much in our individual lives, but in our life together. We have looked so hard at personal success, we have forgotten our fellow passengers. I have set this year aside for taking a look at that. As I explore the gift economy and re-read Bernard Lietaer's wonderful book, I will share it with you.
On the board of the Global Abundance Alliance, three years ago we were beginning to look systematically at "what is a gift economy?" We had read Lewis Hyde's book "The Gift"- my first exposure to the idea that what we know as "the economy" which seems so overwhelmingly important, is in fact a subsidiary section of the give-and-take in humanity, which somehow we have collectively endowed with nearly divine importance. Helen Kessler recommended I read "The Future of Money" by Bernard Lietaer
Helen had the paperback on her shelf, but she lives on the other side of the country. Imagine my surprise when I tried to buy online, to discover that is was selling for $150 a copy! A paperback copy!
I got the book on an interlibrary loan. When it arrived, there was a note to say I couldn't take it out of the library, but could only read it on the premise. So I travelled back and forth for the week or so it took to read 500 pages, taking notes and exclaiming over the story to anyone who would listen, and getting to know the local librarians really well. Meanwhile, my son found a copy in Spanish, fortunately one of my languages, for a mere $50, so I have actually now been able to own and reread it. If I miss the point in my translation, the fault is all mine, and I apologize to the author.
In his preface to the 2005 Spanish edition published in Argentina, Lietaer says he wrote the book in the 90's as a warning that our monetary system was dangerously fragile. He hoped to raise people's consciousness about money and the financial system so as to stimulate the creative alternatives that would cushion the blow of a great financial crisis for as many people as possible. He wanted more people to understand the existence of complementary financial systems that had actually been road tested around the world by people in the countries affected by 86 financial crashes of the previous 20 years.
People who have lived through these preliminary experiences of financial system collapse have pioneered models of mutual credit arrangements that we all can use now that his predictions have unfortunately been fulfilled in the crash of 2008 and subsequent "Great Recession" Such systems are in place in Argentina, Germany, Switzerland, & Austria
His predictions of financial system collapse centered on the role of the US dollar as what's called "an international reserve currency", meaning that dollars have been used all over the world and circulate way beyond the boundaries of any national control. In 2004 the US was consuming 6% more than it produced. In that same year, the International Monetary Fund expressed criticism of the US for the first time in history. The problem was massive, unsustainable levels of debt both by government and industry. If the Chinese and Japanese holders of US dollars stopped wanting them, if it was thought that Americans could no longer repay their enormous loans, there was risk of a sudden rapid fall in the value of the US dollar, on top of the steady erosion of value they were already experiencing .
In the event, the crash that actually occurred came not from government default, but from the unsustainable debts incurred by private financial institutions operating unregulated, internationally..... making ever wilder loans in the real estate market. In fact, the Chinese and Japanese have been gritting their teeth as their US investments plumetted. Apparently they are taking a longer view, not calling in their debts. I suppose they expect we will all work this out together somehow. Lietaer sees our actual financial troubles as a long term opportunity to put in place what it will take to have sustainable abundance. The mutual credit arrangements he champions will need to be democratically controlled, transparent, and regulated against fraud in the same way as official money needs to be.
I am writing this on a train, riding from Washington DC to Raleigh, NC, where I live. It will take me 6 hours- an hour longer than it would take me to drive. There is a lot more leg room than I am accustomed to on airplanes. My daddy was a railroad man, and I rode on a lot of trains as a child, but I have not been on one in years. I had forgotten how large the windows are, and how the land flashes by so close you can almost feel the trees. There are rivers, and fields, cement factories and trailer parks, farms and towns. I am moved by the beauty of this forgotten America. I like the look of my fellow passengers, too. They are not so glossy as the ones on TV.
I think we have been systematically undervaluing and ignoring the things that matter in life- not so much in our individual lives, but in our life together. We have looked so hard at personal success, we have forgotten our fellow passengers. I have set this year aside for taking a look at that. As I explore the gift economy and re-read Bernard Lietaer's wonderful book, I will share it with you.
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