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!"
Saturday, November 27, 2010
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.
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