Greece, Euro and Reality

[Addendum: Tweaked on 12 February 2015, links added.]
[Addendum: Tweaked on 17 February 2015: de-simplification of explanation of high-powered money creation and destruction processes in the interests of accuracy (brevity can mislead).]

Now to Grexit, a.k.a. Greece’s possible exit from the Euro and Eurozone. I’m not going to trawl mainstream articles as I did in the last post, as their narrative is unanimous on one key point, “Syriza has to [insert preferred prescription here] to get Greece growing again.” The disagreement is on how. The why is not examined, for reasons I explored in my last post.

Syriza is a party of hope for those bearing the horrible weight of austerity. The party’s electoral success is an historic event. It is the first time, certainly in decades, that a non-mainstream and very young party (DOB 2004) has defied mainstream opprobrium to sweep to power in Greece. It calls itself a “radical left” party, but seeing as Syriza campaigned on staying in the Euro and Eurozone and that it wants growth, this label is more theatre than substance, regardless of its composition of various smaller left-wing parties. Syriza’s promises on a minimum wage (the UK and US have that), the reinstatement of pensions, more transparent politics, renationalisation etc. are not particularly radical historically speaking. In other words, they are what we might call centre-left policies (with renationalisation being an exception, though still hardly radical). Perhaps the reason the “radical” label goes uncontested in the media is due in part to how right wing consensus has become, and also to the party’s open defiance of the Troika, its willingness to speak its truth to power and vociferously reject the austerity narrative so favoured by Germany, Finland, Holland and others. But I do not want to get bogged down in that swamp of pedantry about neoliberalism, right- and left-wing politics, thrift, debt obligations, etc. Others do that far better than I care to: all of it stays within the mainstream’s preferred narrative of paying back debt no matter what, perpetual economic growth as an imperative, and never questioning the underlying system.

A little on Grexit briefly before I get to the meat. Syriza campaigned on staying in the Euro, but can they do so and defy Germany, Brussels, the Troika and a host of others? Can the powers ranged against Greek defiance allow Greece to defy and succeed? Surely they have to stamp down hard on Greece to discourage Spain, Ireland, then Italy and others from acting on similarly “radical” ideas that are favoured by their populations. In the other corner, Syriza wants to stay true to their anti-austerity programme, so they must defy. If they buckle and continue with austerity, they were a waste of the electorate’s time and hope, and the fascist Golden Dawn party are guaranteed to make hay in that bitter sunshine. My sense is that Syriza politicians are passionately and ideologically committed to their programme, and thus will not buckle.

So something’s got to give. Germany has made it plain they don’t fear Grexit, but I suspect this is a bluff. If Greece exits and makes a decent fist of life outside the Euro’s embrace, this will encourage the others. (And Germany has a small but growing and vocal anti-Euro segment while around 75% of the public does not trust the mainstream press.) This means that all efforts would be made to turn the country into something resembling a failed state. On the other hand, there’s Russia waiting to adopt the abandoned baby (China, Brazil, India?), so Greece might be tempted away from the Euro should circumstances coalesce in that direction, as I think they will. So, in other words, I think Grexit is coming sooner or later and believe it will be messy.

What I want to examine here in more detail is what can be accomplished within the current money system and broader growth-based paradigm, primarily by Greece but by extension any other nation. My operating assumption is that the economic growth required by capitalism is over, and that this fundamental situation is causing constant economic and political disruptions across the globe. The reasons for this are varied, but primary among them are:

1.       Automation blocking the flow of money through the economy, and attendant weak wages are contributing to anaemic demand and insufficient purchasing power

2.       The bumpy peak oil phenomenon

3.       Consumerism losing its appeal at the edges (and increasingly in the centre)

4.       Peak debt in the private sector a.k.a. tapped-out consumers = insufficient purchasing power (see below)

5.       The decline of ecosystem health across the planet.

While each factor receives sporadic attention from the mainstream media as isolated issues, it is their interconnected, cumulative effects and profound implications that are studiously overlooked. The powers that be are systemically required to continue to flog this dead-horse system to mincemeat for fear its death spells their demise before they reach sufficient escape velocity and fully decouple from the hoi palloi. A delusion on their part no doubt, but I think we all know how hard it is to drop cherished delusions, especially those we believe define us.

Given these conditions, Greece can accomplish very little indeed within or outside the Eurozone, since neither location changes any one of them. Even leaving these vital issues to one side, as a member of the Eurozone Greece cannot raise money by its own fiat, as that power has effectively been ceded to the ECB: when a member state’s debt exceeds 60% of GDP it may no longer issue its own bonds. Greece is at around 175%. In effect, Greece needs permission from the Troika to pay out pensions at the level that makes sense to it, to pay teachers and police the higher wages it believes they deserve, to invest in infrastructure development etc. Being granted permission to take on more debt to pay off existing debts comes with a whole raft of neoliberal demands that rule out such state largesse. Yanis Varoufakis, Greece’s finance minister, has put forward a “Modest Proposal” that, riddled with the language of perpetual growth, suggests debt swaps to get the ball rolling again. However, considering the country’s anti-austerity ambitions, its hostility to the Troika but loyalty to the perpetual-growth paradigm and the overlooked boundary conditions, not only are such band-aid measures falling on deaf ears, they will fall short of producing the desired effects, even though a short bounce back from the depths of a very nasty economic depression is achievable. Should this New-Deal proposal be green lighted by Russian backing and thus outside the Eurozone, the boundary conditions do not change. I am not aware of any plans to change the money system itself, though a proposal has recently been made (German article) to that end by Professor Franz Hoermann and Sarah Hassel-Reusing.

So, these are the current rules of the money game, and the Modest Proposal sticks to them, Euro or Drachma. Money is created as debt one way or the other. Interest-bearing debt in this model is backed (sustained, kept going) by expanding economic activity, not gold or other single physical resource, though cheap oil is of course critical to strong growth. If there is too-low, zero or negative growth, the debt-money system implodes, i.e. recessions, depressions and anaemic growth are invariably Bad Things. I examined this in my last post from a narrowly money-system angle, I want to examine it here from a crude, structural angle to make a very simple point. I’ll start by sketching the economy as a whole then proceed to some thought exercises.

A modern economy is basically composed of a public (state) sector and private sector at the broad, macro level.

There is, in keeping with this, both state debt and private debt.

Following from that there is high-powered money and bank money. Both are brought into existence as interest-bearing debt one way or the other.

A state creates new high-powered money when it repays its debt. Private debt is incurred when commercial banks create new bank money (issue loans) to firms and individuals.

High-powered money resides in central-bank accounts held at commercial banks. These accounts are currently awash with high-powered money after the various tranches of quantitative easing. This money represents, theoretically speaking, the “reserves” against which commercial banks are said to issue new bank money via loans to private firms and individuals (fractional reserve banking, though banks in Canada and the UK are allowed to loan money into existence against no reserves, i.e. how it happens in the real world is different). If banks don’t create bank money as loans, high-powered money does not lead, as it were, to more bank money via lending. More simply, it does not reach the consumer. This system feature lies behind all the talk of getting banks lending again.* Commercial bank lending is how our economies are kept lubricated.

Both sectors are thus always indebted, because money is created as debt in both. One corollary of this is that if all debts were repaid tomorrow morning, there would be no (bank) money in the economy (about 97% of the money supply). Money is debt. However, there is nuance. I.e., commercial bank money disappears from the economy as commercial loans are repaid, while high-powered money is added when government repays its debts (government debt is replaced with high-powered money). 

The relationship between central and commercial banks thus mirrors (slightly) that between oxygen-emitting plants and oxygen-breathing animals, only the relationship is nowhere near 50-50, but about 3-97. The trick is how money is moved through the economy to effect economic activity (wages, buying and selling) and how to keep the relationship between that movement and the overall money supply on the one hand balanced with economic activity and growth on the other (i.e. controlling inflation/deflation). We can’t just spend money into existence with total abandon without somehow destroying it too; the money supply would balloon far beyond what economic activity could bear. The system is designed with this in mind: debt repayment removes bank money from the economy, taxes and selling government debt remove high-powered money from the economy. However, there is always interest to pay, and that requires exponential economic growth: one systemic effect of interest is that there is never enough money available to cover the interest owed. This creates a musical-chairs atmosphere of constant competition, where survival tends to be about being the biggest, i.e. always growing, always increasing profits and market share. And this dynamic dutifully adheres to the state (or civilisational) project of Human Ascent.

So, were money not created as debt, it would be printed (or spent) into existence, as a government might do faced with the thought experiment below. But I think most of us know how taboo that is in real-world circumstances. It should also be apparent why the problem of growth is such an intractable problem, institutionally speaking.

(As an aside, if you think your money is yours, that because your current account is in the black and you owe nothing to anyone you are thus not debt, ‘your’ money is nevertheless owed by someone to a bank somewhere and is thus someone’s debt. To make matters yet more counterintuitive, money at the bank is in fact the property of the bank. You are allowed to use ‘your’ money while the bank deems it permissible for you to do so. Banks may close their doors during a bank run, for example. (Remember the Cyprus bail in?) The system is more important than the individuals of which it is composed.)

The reason we constantly hear of debt mountains during busts (but not booms), is because low growth inhibits commercial banks from issuing and consumers and private firms from taking on new debt (tapped-out consumers). The system stops functioning as debt repayments gradually exceed earnings throughout the economy. Low, zero or negative growth and debt-as-pain are thus synonymous, hence the mantra Growth is Good. When the economy is growing, debt is invisible or not generally problematic at national and international scale. When it is contracting, debt becomes an issue.

After quantitative easing, poor economic growth in the ‘real’ economy of manufacturing and widget production means banks increasingly seek their profits by gambling high-powered money on the stock and commodity markets, hence that is where we currently see very visible growth, or bubbles. This means the financial sector rises and falls in a volatile way while everyone else suffers worsening malaise. What to do?

Back to Greece. Syriza’s solutions stay within the system and broader paradigm. They want to swap out painful debt for less painful debt to free themselves to stimulate their economy by directing purchasing power via restored pensions, public-sector salary increases and infrastructure investment directly into the pockets of consumers, thus bypassing commercial bank lending. The consumers will then dutifully go out and buy with renewed abandon, thus collectively causing an uptick in GDP. This will boost business confidence, which will lead to banks again seeing profit on the other end of issuing credit to businesses and individuals, and we return to normal. Après le bust, le boom!

This looks relatively sound on paper and would no doubt conjure a recovery from the bottom (not in itself a bad thing considering the suffering of the Greek people), but let’s look at this (old) idea in light of the boundary conditions I listed above. To do so we’ll start with some simple thought experiments that, hopefully, will bring into relief important economic distinctions between the public and private sectors.

Imagine that all commercial manufacture, retail, food production and distribution, i.e. the entire private sector, is now automated and requires no human labour whatsoever. All that remains for humans to do is teach, police, put out fires etc., all paid for by the state. What happens to money flow in this bizarre scenario? The state pays money into people’s pockets, they buy stuff over the internet that is delivered by driverless vehicles to their door. From whom do they buy? The owners of the means of production who continue to attach price tags to their goods and services. So money flows from state coffers through consumers’ pockets and on to the owners of capital. Either the state taxes back that money 100% to pay its workers next month, or it borrows and borrows and borrows, going deeper and deeper into debt.  Private individuals do not exchange money among themselves at all in this scenario, so the number of times money changes hands is one: from consumer to owner of corporation. Money flows straight to the owners of capital who earn pure profit, more or less (I’m leaving out the costs of raw materials, utilities and land for the sake of argument). Therefore, the only point at which the state can realistically exact tax is from the owners of capital.

There’s an obvious pointlessness to the above highly fantastical sketch. Of course, I haven’t added banking and interest rates nor considered who builds those websites etc. because it doesn’t illuminate my central point, which is this: What balance of public and private economic activity is healthy for an economy? This is of course the stuff of endless and heated debate, but it should be obvious that it can’t be 100% state. I’ll repeat and italicise that: it can’t be 100% state.

Back to the boundary conditions. The commercial sector needs fewer and fewer human workers to produce the abundance of consumer goods there is not enough effective demand (purchasing power) to consume. The environment cannot cope with the amount of resource depletion consumerism is exacting on it. More and more people are unsatisfied with consumerism. Peak debt, peak oil, peak other stuff are coming home to roost. In short, demand is too weak for the system’s perpetual-growth needs. If the state stimulates demand via direct spending (not via commercial bank lending), will increased consumer spending lead to meaningful and secure private sector jobs for a sufficient number of people? Or will corporations’ increased profits resulting from this state largesse free them to rationalise, invest in new automation technology and further increase their profits? Will ecosystems allow this game to go on indefinitely? Will ordinary folk be forever enthralled by the hollow allure of consumerism as ecosystems fail, as their hunger for authenticity and community grows?

I have worked in the automotive sector as a translator and translated documents that detail how wages are the only cost companies can tweak (downwards) to increase profits. Staff are an unwanted overhead best minimised. The competition is very fierce in the automitive sector, and no doubt elsewhere. If Corporation A doesn’t downsize to stay price competitive, Corporation B will and then eat into A’s market share via lower prices. As this pattern increases and meaningful, well-paid work disappears, the state will be under pressure to take up the slack more and more so as to furnish consumers with enough purchasing power to buy what is on sale. If they want it. If the planet can cope. If Neoliberalism permits or yields to Neokeynesianism.

Now imagine the energy problem is attacked with vigour. Oil and other fossil fuels are no longer needed. There is suddenly an abundance of cheap, renewable energy. Now is sustainable growth possible? Not really. Cheap, green energy does not change the spectre of technological unemployment, in fact it makes it worse. It also does little to nothing to reduce consumerism’s environmental footprint (mining, soil fertility, plastic crap, toxins etc.), except on the carbon-emissions side.

Consumerism, a.k.a. the inevitable Cancer Stage of Capitalism, is the wrong economic model for current realities, regardless of Grexit, Euro success, austerity, government-side economic stimulation and so on.

We are already asking too much of the state and in pursuit of the impossible anyway: perpetual growth. For systemic reasons we cannot ask the state to carry 100%, or 90%, or 80% etc. of the economy. Indeed, 50% is probably too high for systemic reasons, and I believe some countries are steadily approaching that figure. Neoliberals probably want to see it down at 10 or 20%, but purchasing power would collapse.

As ever, short-termism prevails in the desperation austerity has wrought, medium-term thinking is the best we can do in the circumstances, and that at the fringes of political and business activity. We will thus stay mired in this systemic problem (absent little, short-lived growth spurts here and there) until the underlying perpetual growth dynamic and the boundary conditions I set out here are seriously, openly and wisely discussed right across the planet, and until radical change is pursued. Syriza appears not to want to address this and is thus nowhere near radical enough, though I commend them for their courage and integrity.

* From Bloomberg:

Banks may now be less reluctant to pass on negative rates to clients thanks to surplus liquidity.

“Banks don’t have a need for deposits, and the demand for loans by households and firms is weak,” Niels Storm Stenbaek, chief economist at the Danish Bankers Association, said in a phone interview.

Source

“[T]hanks to surplus liquidity” references quantitative easing. There’s a tonne of money out there in commerial bank accounts. Consequently, banks no longer need customer deposits, and on top of that demand for debt is weak. Banks are making huge profits nevertheless, not by lending to the private sector, but by gambling all that high-powered money on the markets. This explains the divorce between market boom and real-economy malaise.

Money = Equals

(What follows here is a somewhat different run up at the conundrum of money and how it pertains to debt, and what both 'really' are.)


Ignorance ‘out there’ about money is about as endemic and deep rooted as possible, penetrating the highest halls of academia, flooding the busy offices of the world’s mainstream media outlets, and poisoning economic thought and study as far as the eye can see. My own studies have yielded repeated gems of ignorance even in works that are otherwise excellent exemplars of academic rigour. The problem is that our cultural notions of money remain almost totally unexamined, even though money is key to society. Somehow we are generally prevented from debating this enormously important topic as openly and widely as it deserves.

Our collective ability to pierce money and understand it has only recently begun at the level of popular culture (the Internet is instrumental in this). Bernard Lietaer, Stephen Zarlenga, Ellen Brown, David Graeber, Charles Eisenstein, Bernd Senf and Franz Hoermann are some of the authors I know doing fine work on the money myth, and there are many others I’ve still to get to. Yet even now, most people think (or feel) that money is (or should be) a thing with ‘intrinsic’ value, that it is, in some inescapable way, real wealth. Our deep history tells a different story. Money’s origin had far more to do with measurement than store, was far more about keeping track of stuff than being something ‘intrinsically’ valuable (even though there is utility value in keeping track of value!).

With that in mind, perhaps we shouldn’t be talking about a linear progress from commodity money to information money, but of a return to information money, albeit in a new form. Graeber talks of money as debt, debt as a promise, and suggests the type of question we should be asking is what kind of promise, and how those promises are generated and administered. The launching pad for this post, however, comes from Ellen Brown’s article, “Time for a New Theory of Money”.

The concept of money-as-a-commodity can be traced back to the use of precious metal coins. Gold is widely claimed to be the oldest and most stable currency known, but this is not actually true. Money did not begin with gold coins and evolve into a sophisticated accounting system. It began as an accounting system and evolved into the use of precious metal coins. Money as a “unit of account” (a tally of sums paid and owed) predated money as a “store of value” (a commodity or thing) by two millennia; the Sumerian and Egyptian civilizations using these accounting-entry payment systems lasted not just hundreds of years (as with some civilizations using gold) but thousands of years. Their bank-like ancient payment systems were public systems—operated by the government the way that courts, libraries, and post offices are operated as public services today.

[...snip...]

The unit of weight was the “shekel,” something that was not originally a coin but a standardized measure. She was the word for barley, suggesting the original unit of measure was a weight of grain. This was valued against other commodities by weight: So many shekels of wheat equaled so many cows equaled so many shekels of silver, etc. Prices of major commodities were fixed by the government; Hammurabi, Babylonian king and lawmaker, has detailed tables of these. Interest was also fixed and invariable, making economic life very predictable.

The point I’d like to make here, one which Brown does not address, is that the notion “equals” is a 'wisdom' vital to developing the concept of money, as is the idea that “value” is measurable (value which is to be stored for practical reasons (see below)). Eisenstein talks about equivalence in “Sacred Economics”: “Money is homogeneous in that regardless of any physical differences among coins, coins qua money are identical (if they are of the same denomination). New or old, worn or smooth, all one-drachma coins are equal.”

Money cannot therefore be the thing denoting it, it can only be the agreement (or fiat) about the measurement of value (and/or a price system generating ongoing value measurements via supply and demand). The giant question is, can there be a unit such as Value=1? Readers of “The Ascent of Humanity” will be familiar with a tribe of ‘primitives’ called the Piraha. Its members cannot understand counting, cannot be taught numbers above 1. For them, everything is unique, hence 1+1 is an impossible question (as is 1=1), cannot be imagined, its utility cannot be discerned. If there cannot be two of anything, what then is 2? Without “equal”, without a uniform unit of some kind, you cannot have money, nor counting. I see this as a profoundly important observation. An attempt to assess or measure the value of value—e.g., of grain relative to cows—can only occur in societal conditions generating the need for such measurement, including extracting taxes, paying wages, selling slaves, controlling economic activity, explicit tracking of debt and ownership, etc. At its deepest level, therefore, money arises out of the belief that nature can be controlled and measured.

Deeper into the money story we have explicit debt, a direct corollary of “equal”. The notion of an explicitly measurable credit/debt axis, though balancing and balanced, can, I feel, only arise out of the Separation Eisenstein talks of; Self from NotSelf, Me from You, Us from Them, Mine from Yours, Body from Spirit, etc. But why must a benefit be opposed by an exactly equal detriment? Isn’t that pure negation? Can anything be net-created at all? How is there change? We say every action has an equal and opposite reaction, but what is the opposite action of a smile? More fundamentally, what is an action? It is true that if energy goes there, it leaves here, so in that narrow sense credit/debt might be understandable. But what is energy, exactly? Information, perhaps? Are those two one? I don’t think so, and that is a VERY weird thought. On with the article:

Grain was stored in granaries, which served as a form of “bank.” But grain was perishable, so silver eventually became the standard tally representing sums owed. A farmer could go to market and exchange his perishable goods for a weight of silver, and come back at his leisure to redeem this market credit in other goods as needed. But it was still simply a tally of a debt owed and a right to make good on it later. Eventually, silver tallies became wooden tallies became paper tallies became electronic tallies.

Note how perishable is bad. Surely decay can only be a bad thing if we are too frightened of death, age, decrepitude, of the circle of life? This fear too has its roots in Separation. Note also the inescapable progression from store to bank to debt/credit. If I deposit something I own with you (ownership is vital), you owe me it back, or, you hand over an equal amount of something, so as not to owe me. But that something (silver, gold, paper, money, ledger entry) becomes a claim on other people’s product, a.k.a. society’s debt to me generated by my contribution to it as measured by some weight of silver/unit of value. And they must equal, otherwise the process is unfair, unjust, ‘game-able’, etc. But they cannot be equal. Nor can we really measure how much of that contribution was a product of my work, how much is owed to the soil, how much to slaves on my farm, to the sun, rain, weather, etc. The whole process is fraught with difficulty even at the simplest level, and very vulnerable to manipulation and corruption.

Next comes the implicit zero-sum of money-based thinking (which Brown arrives at discussing modern alternative money types):

Consider, for example, one called “Friendly Favors.” The participating Internet community does not have to begin with a fund of capital or reserves, as is now required of private banking institutions. Nor do members borrow from a pool of pre-existing money on which they pay interest to the pool’s owners. They create their own credit, simply by debiting their own accounts and crediting someone else’s. If Jane bakes cookies for Sue, Sue credits Jane’s account with 5 “favors” and debits her own with 5. They have “created” money in the same way that banks do, but the result is not inflationary. Jane’s plus-5 is balanced against Sue’s minus-5, and when Sue pays her debt by doing something for someone else, it all nets out. It is a zero-sum game.

Something bugs me about all this. There are two important money-related things happening when Jane bakes cookies for Sue. One is the dead material, including the energy, used to bake the cookies. The other is the effect doing such has on Jane’s and Sue’s (‘friendly’) relationship. How would this market process sound to us if we were to discover Jane and Sue are in fact sisters? In what way is baking someone cookies a favour if it is immediately ‘paid for’ with an exactly corresponding debt? Any potential gratitude disappears into the hole called “-5 favors”. Sue need feel no gratitude to Jane whatsoever, since now she explicitly owes the Friendly Favors community 5 favours. And what if those favours were iPads, or houses? How many cookie-favours equal one house-favour? And yet the idea of money as a favour is powerful.

Inescapable in a money-system is a unit of account, which needs market-trading to be organic and flexible (Value cannot = 1), which at least implies competition and profit, profit being reward for success, which is part of sorting the good ideas from the bad. We cannot escape failure (and shouldn’t try to), which with an explicit money-measure means indebtedness, which tends to accumulate, which is something no one wants happening to them (The Stick). Logically an accumulation of wealth must also occur (The Carrot), potentially (always?) followed by corruption aimed at keeping the playing field favouring the successful (since they’ve ‘proven’ themselves successful, this is of course justified; ‘survival of the fittest’ and all that), and so on. And history delivers this pattern again and again, with excessive income gaps preceding breakdown and revolution. Can we escape history's rhyme? Should we? Sort of and sort of. Neither money nor poverty can buy you love or joy, and the oscillations they set up are increasingly destructive. We risk our own extinction in pursuit of an illusion. The pattern has gone global.

Surely, then, the area of concern should be trading itself, or, more accurately, the paradigm and social infrastructure in which trading takes place, the functions and expectations it fulfils. At this point reference to Marshall Sahlins’ work on reciprocity would be helpful.

Sahlins ("Stone Age Economics" p193ff) divides reciprocity into three types; generalised, balanced and negative. Generalised reciprocity is ‘pure’ gift-giving with no expectation of return. Balanced reciprocity might be transparent agreements between clans or friends where the exchange is as equal as can be; no profit allowed at the cost of the partner, mutual profit being the point. Negative reciprocity includes tricks and subterfuge, what in economics might be called “information asymmetry”, such that maximum profit is sought at the expense of the partner.

Trading can only be about negative reciprocity, if such profit is its goal. The persistence of the myth that ‘free’ markets deliver maximum social good shows us how far we still must go to see our species as one family whose members should engage only in generalized and balanced reciprocity. Large, differential profit is still the sign of good business, the indicator of success, and by the dubious logic of economics business success leads inexorably to a successful society. And yet isn’t it by now abundantly clear that the Invisible Hand is a failed myth, that trickle down was a cynical and empty promise?

Reorganizing our paradigm to provide a framework in which trade and exchange can include investment of accumulated wealth yet be free of negative reciprocity will not be easy (at the simple level, Friendly Favors is a case of balanced reciprocity, but I don’t see how it could scale up). The challenge I see is how, even in crude outline, to walk the path towards a resource-based economy. Parts of it will be negative interest rates (demurrage), guaranteed income (social dividend), re-localization (the break up of the state), but what is clearer and clearer to me is that, from here, we cannot know what a resource-based economy will actually look like. For example, if money is a promise somehow denoted by a unit of account, perhaps we will never do without it. Will our language one day be free of “Thanks, I owe you one”? I doubt it, but who knows.

I’ve wandered off in a direction Ellen Brown probably wouldn’t have foreseen as a response to her article. No short article can cover all the bases, nor do I agree with anyone on everything (not even with myself), and yet I have a hard time disagreeing with Ellen Brown’s conclusion, which may surprise some of my readers:

“We have emerged from the financial crisis with new clarity: Money today is simply credit. When the credit is advanced by a bank, when the bank is owned by the community, and when the profits return to the community, the result can be a functional, efficient, and sustainable system of finance.”

Even treading the path to a RBE will require a new definition of money, and a new role for our banks—neither can be switched off over night, probably never. Whatever fulfils the function of a bank—which should be democratically redistributing community-accumulated wealth back into the community—whether that entity is internet-based, or located in an actual building, that function is inescapable, even should there be no money in the way we understand money today. What seems inescapable, and healthy, is a transparent method for democratically managing the excess fruits (profits) of the community’s efforts, a system we can trust because it is open, clear, simple to understand, and staffed by people we know and can talk to if need be. Local is therefore key. Guaranteed income is likewise key for those of us who, for whatever reason, are not quite as ‘useful’ to the economic sphere of the community as others. What may not happen is a forgotten, poverty-drenched sector of society that can find no way to dignity, and becomes alien at the edge of life. What may also not happen, is that the economic sphere is thought of as the most important.


(Here are some rough thoughts in reaction to this post:

Money is a promise frozen as an exchangeable debt which has utility proportionate to society's need to trade goods and services in some kind of market. If trade is unnecessary, so is money.

"Money is a promise" to pay. To pay what? Goods and services? Kinda. Couldn't we say that goods and services are promises to pay money? Bank of England notes are promises to pay the bearer the amount denoted on them. This is incomprehensible, but because it is everywhere and state-sanctioned we accept it unquestioningly.

Money is a moment-to-moment enabler of the belief that it is a promise to repay a debt--it works! If I have 'earned' money, I have 'earned' promises from society to hand over those goods and services of equal value I choose to purchase. The money I hold is society's debt to me. It is an indication of a relationship, a standing between me and society as measured by credit/debt.

Banks of the western model profit from this debt/credit accounting/monitoring via usury. Should they? They are providing a service, so why should they not be rewarded? They should be, but that line of inquiry is a dead end. Why money? Because trade? Why make explicit an accounting of debt and credit? Because trade? Why trade? Scarcity. Labour. Property.

If banking were automated, it would need only to be fed the amount of energy it needs to run. The admins sorting out the inevitable problems would have to be paid though! By whom? By society. Society would owe them a debt. What if those admins had fun doing their work, and needed no explicit reward, as in open source software? What if work done to keep the system going were rewarded generally by the functioning of a RBE? What if debt and credit were not explicitly tracked? What if it were culturally understood that we all benefit from doing what we can to keep such a system going, hence there would be no need for a money-accounting as an explicit attempt to measure value and track credit/debt. We need only track resources and ecosystem health. For starters, value cannot be measured. Attempting to do so has proven vulnerable to all sorts of heinous and unforeseen side-effects. Because money-rich is better than money-poor, having (explicit) money as part of society becomes a pressure to game the system so as to get rich and stay rich.)

Does Banking Require Debt?

“Government spending occurs simultaneously with a credit to a private bank account—that is to a demand deposit at a bank. The offsetting liability on the government’s books is a credit to the bank’s reserves at the central bank (which is the “private” bank’s asset).” L. Randall Wray

‘Spending’ money into existence entails the entry of a number into a private bank account. A government pays for something by ‘depositing’ ‘money’ in someone’s private account. That money is then a debt as seen by the bank where the account resides; it is money that can be withdrawn. To offset this ‘debt’ an equal amount is entered by the government in that bank’s reserve account at the central bank. This is double entry bookkeeping, in which the active and passive sides (double entry) of the ‘ledger’ must balance, a carry over from the middle ages when all we had was pen and paper.

This means that ‘spending’ in the MMT world view must incur a balancing liability, either at the ‘cost’ of whatever interest rate is set by the central bank and/or generated by market forces (treasuries, bonds etc.), or for free when the offsetting liability is created as indicated above. However, this “for free” ceases to be free at the private banks, since the reserves are used to generate more loans (banks exist to make growing profits), so debt-based costs do arise in the economy from all government spending, since the banking system is the mechanism use to distribute money. The economy is one system, no matter how we notionally separate the components.

If we can accept governments ‘create’ money, why the debt, why this insistence on double entry bookkeeping? Debts are only going to be ‘paid back’ with further ‘borrowing’ anyway, especially if all money is spent/borrowed into existence in the first place – there is only debt, its circulating, its destruction, and further creation. Well, the way I’ve read it, we ‘need’ debt for two main reasons, and both are systemic:

1. As part of how money is removed from the economy – without refined and sensitive techniques for cooling the economy down, it will over-heat.

2. Debt is how banks make profits, and though governments, via central banks, do create money, they do this through the banking system, using its techniques. And, at a more fundamental level still, debt is a reason to ‘need’ banks at all. Debt is what banking is about, fundamentally.

The problem with (or cost of!) debt is usury, which inexorably sucks money to lenders (banks), meaning wealth increasingly concentrates to the financial sector over decades, which becomes a drag on the economy. Money will lose value when growth slows (and growth cannot go on forever), if, when less debts are taken out privately and the money supply contracts, government borrows/spends into the economy so that debts can be repaid and deflation kept at bay. This spending creates new debts (of course) which must not only earn banks money somehow (otherwise they die), but also corresponds to no goods and services at market-demand level, or, put another way, does not reflect genuine ‘market’ activity (see China’s Great Mall and Japan’s oceans of concrete). Government demand is ‘fake’ in the sense that the economy can’t really afford it, by definition. If it could, the government would not have to step up to the plate as borrower/spender of last resort. Interest is the heat that keeps the economy hot, active, dynamic, since it renders the money supply scarce. But it requires growth as a side effect, and growth cannot go on forever.

“People just didn’t want to borrow because the economy was collapsing and they were carrying too much debt. [ … ] Reserves, then, are like a bank’s checking account at the Fed. A bank can lend those reserves only to another institution that is allowed to hold reserves at the Fed. Banks do lend reserves to one another in the fed funds market, but since banks already have more than a trillion dollars in excess reserves, there is no need to give them more in order to encourage them to lend to one another.” Marshall Auerback

Marshall Auerback also mentions that Canada’s banking system has no reserve requirement at all, something I did not know. But so what? When people owe too much money, they stop borrowing. Banks can be as flush as possible, but if everyone else is indebted, the economy slows down.

To my mind there’s this odd disconnect—in MMT as elsewhere in orthodox economics—between awareness of the problem of people’s indebtedness on the one hand, and this cavalier attitude to money creation as debt on the other. In theory, money can be created as and when a bank, central or otherwise, believes such to be profitable/sensible. In the theory we get a picture of endless lending, back and forth, from reserves to credit to debt to credit and back again, and everywhere there is endless demand for goods and services, so there’s no actual problem. Except people, consumers and producers alike, get indebted. And then there’s the planet’s carrying capacity which doesn’t even get a look in. All in all it doesn’t add up. Only, in the steam of this theorizing, money is being stripped of its symbolic power. Though no sovereign need default, that hardly matters. Money, in its current form, has taken a beating and clearly needs reform, or revolution, and this requires revolution everywhere else.

It is not that government spending is good or bad per se, nor that market-based money lending is better or worse, but that debt/usury skews the game towards the financial sector, and demands perpetual growth. In that nothing can grow forever, usury has to come to an end some day. That “some day” is happening now, logically at the apex of the banks’ power, making sufficient recognition of the core dynamic difficult to impossible prior to systemic collapse.

Eventually (sooner rather than later) we must dump this forced-growth system, dump debt, dump usury, and invest in steady state growth. This will require a new idea of ‘profit,’ in which societal and environmental health become the primary indicators of how well we are doing, rather than the bank-friendly GDP rate, Number of Billionaires, and Corporate stock prices. Waged-labour will become yet more cumbersome as economic activity becomes a less significant element of societal well being. As Money the Myth dissolves in its own heat, so will monetary wealth fail to be the potent indicator of success it still is.

Happiness, which makes life worth living, can only grow so far. Who would define themselves as ecstatically happy with their lives, and what sort of a system would demand happiness levels grow beyond ecstatic to ever dizzier heights? Change may be the only constant, but from a simple math perspective, increasing GDP has to stop producing increasing happiness, to ignore planetary carrying capacity for a moment. The glow is wearing off. GDP, that is, economic activity, is losing its charisma. Through the centuries the economy has taken us far, now new forms and endeavours must be learned as economic activity becomes less relevant. Will MMT carry on with its current momentum? I believe so, and am happy about that. It is part of the process of demoting money and promoting wealth I feel to be the chief characteristic of what humanity is going through. But I suspect MMTs success will be banking's demise, and technologies like Square (hat tip Steven Malagodi) are going to play a starring role.

Of Profit and Loss

“The true scale of the national debt is £2 trillion - more than twice the official figure, an alarming study shows.

The black hole in the public accounts equates to £78,000 for every household in the country.” Read in This Is Money (hat tip Mike Shedlock).

Here we see the standard and totally unsurprising equation of money and earnings with wealth, and consequently of debt with not-wealth. Nowhere is the nature of money creation discussed, nor is it even implicity suggested that wealth and money are not in fact joined at the hip, that the “black hole” in public accounts is a mere notion, a totalled number of other numbers we have counted over time to track things like pay and costs. Everywhere we look, money is value, money is wealth. This silly story we tell ourselves is deeply and dangerously wrong. There is indeed profligacy and useless State and Market waste across the world, but this too is part of the deeper problem of the flawed money-story this post briefly discusses.

The tight and inflexible cultural association of money with wealth is doing unknowable amounts of harm to society and the wider world. It veritably forces us to pursue those endeavours and enterprises which earn money, at the cost of pursuing those which lose money. After all, money makes the world go around, right? If you’ve got enough money, you can do anything, anything at all. Only your imagination limits you. But what exactly are ‘earning’ and ‘losing’ money, and why is the former good and the latter bad?

First a brief reminder of what I believe money is. It is a symbolic tool for distributing scarce goods and services (including land and labour) throughout a forever insatiable planetary population. It is furthermore an enabler of complex economic activity (as opposed to barter which only enables simple economic activity). It is NOT a store of value. A medium of exchange cannot store value. That’s what makes it a medium. Just like language does not contain reality but strives to represent it, so money does not contain value but strives to represent it. So, money is an abstraction of value, or wealth, for distributing scarce stuff, via price information, to and from people.

Earning money is the short or long term accrual of this representation of wealth to some part of the economy, be it an institution, a corporation, a person, or whatever. Losing money is the opposite. That this equates to good and bad in modern society (post-farming) is a function of the utility value of money. While society is capable of producing surpluses for sale, money is very handy to have. And since we have specialized labour to the extreme point of total dependency on surpluses being produced by others (typically machinery), we badly need money to survive. This societal progression deeper into the money story explains, in part, how we have come to equate money with wealth. Without it we are in deep doodoo.

But – and this is an extremely important ‘but’ – you can neither eat nor drink money; you can only spend it or save it. Of course this is a tired cliché, but that does not make it less true. As time goes on we are destroying the ecosystems and burning through the fossil fuels that make surplus possible. See ecosystems as the organisms keeping our social bodies alive, see fossil fuels as inherited savings from Mummy Earth and Daddy Sky. We are, like spoiled brats, racing through our savings to destroy our life-enabling habitat, just to perpetuate, for as long as we can, the enormous, high-paced, multi-century party we think ourselves addicted to. We call this party Perpetual Economic Growth. It is totally unsustainable, just like the tower of Babel which was supposed to reach heaven. Money (among other things) makes us do it, but money will be of no use to us whatsoever once the surpluses start running out.

That is one way in which money earnings and losses are not that important. Ecosystems and communities are important, and in a state conducive to human society.

The second is derived from a systems analysis of money’s functioning in society. Money needs to flow, to move from place to place if it is to enable trade. Money-wealth is hoarding, which is the antithesis of flow, so important to functioning economies. It follows therefore that earning and losing money are (or should be seen as) brief but necessary eddyings in the total money pool as economic activity takes place, where “brief” is the important qualifier. The more we stress ourselves culturally and politically about these poolings, the more we will tend to hoard, or stagnate economic activity. A stagnant economy is one in which wealth/debt divisions freeze in their current positions. Also problematic is the simple truth that having more and more money makes sense in this system. Being ‘rich’ is better than being ‘poor.’ (This second observation does not take growth into account, so is incomplete. It serves therefore merely to highlight the internal illogic of lauding profit and denigrating loss. Both are logically necessary qualities of flow, money-flow is vital to healthy economies.)

The third way in which profit and loss are not the sweet and bitter our incomplete money story characterises them as, relates to the different societal roles and consequences of Market and State. In an old post I describe how debt-based money becomes ‘genuine’ money in the economy via asymmetrical payback of loans. This happens in the private sector, because borrowing leads to production, buying and selling, which generates the uneven pooling I describe in the paragraph above. To my way of thinking, uneven pooling is what profit/loss is, systemically speaking, and occurs only in the private sphere. Because we have come to confuse money for wealth, this in part explains our current cultural love affair with private enterprise – it ‘earns’ money.

Modern Monetary Theory offers a model of society in which the State sector functions as provider (creator, printer) of the money the economy needs to function. To see this money-creation as somehow indebting the State is deliberately to fail to see, 1. that money is not wealth, and 2. that the State is providing a service from which economic activity can thrive. Also important is the acceptance of the necessity of non-pooling (loss making “black holes”) societal activities, such as public education, army and police, which cannot generate money profits. They do, however, generate other, more important, profits, such as a well educated (hopefully) and healthy population. To think of the State, which is society’s self-organizing element, as going into debt for maintaining (paying for) a fire brigade, a national health system, a national education system, a defense system etc., is completely to misunderstand wealth, and also the complex ways in which society stays cohesive.

I had intended to write a short blog. I failed, even without discussing taxes as government ‘earnings’. Yet even this would have been too little. All money-systems are necessarily about scarcity, and therefore encourage hoarding and fear of want by design, on a planet rich in abundance of those things we need to survive happily and healthily. If this were not true, we would not be alive (we don’t eat money), and yet this simple fact utterly eludes us at the cultural level. Planet Earth, not money, gave birth to us, is the set of systems out of which we arose and in which we are embedded. This deeper component of the money story, which most will not confront, including flawed notions of ownership, control and elitism, is the deeper root of the nonsense I quote above.

Of Growth, Debt, Interest and Abundance

“Creating money on the basis of debt, therefore, makes the economy fundamentally unstable. The system is always balanced on a knife-edge. If bank customers borrow too little, the economy moves into recession and, unless corrective action is taken, [...snip...] the positive feedbacks just discussed (such as people’s natural reluctance to borrow and spend) will kick in and produce a catastrophic depression.” “The Ecology of Money”, Douthwaite, p23.

“Another fundamental problem with the debt method of creating money is that, because interest has to be paid on almost all of it, the economy must grow continuously if it is not to collapse.” Ibid, p24.

“Continuous economic growth is impossible in a finite world. True, some people believe that growth can be made environmentally harmless (‘angelized’ to use Herman Daly’s term) by being stripped of its energy and natural resource content, [...snip...]. But this is a pipe dream. The energy and resource content of many activities can certainly be reduced so that we can do more of them without increasing our environmental impact, but that impact cannot be reduced to nothing.” Ibid, p25.

Why is growth good? Why is decline bad? Surely neither is good or bad. However, debt-money + interest = dependency on non-stop growth. Perpetual growth, as we understand it through orthodox economics, is mathematically necessitated by interest. And while this mad pursuit does indeed inspire innovation, it does so blindly, rapaciously, and is wrongly reliant on an unprovable Invisible Hand which either does not exist as conceived, or is inherently ‘co-optable,’ that is, not at all out of the reach of those who benefit greatly from manipulating it, which Adam Smith himself knew. Hence the usury model turns out to be unfair to a degree which would shame Mother Nature, famed for her inherent ‘unfairness.’
 
Economic growth of the interest-debt-money variety does not yield a sustainable relationship with the environment, finds decline to be bad, is systemically incapable of non-linear thinking, entrenches insoluble and gaping societal divisions, and prioritizes money-making above all other activities. All this encourages stifling corruption, corruption aimed both at milking and sustaining the status quo. Usury money is inescapably, mathematically the money of scarcity. A system built around the deep assumptions of scarcity necessarily encourages hoarding and fear regardless of the abundance of nature. The interest-debt-money system is a double-looped positive feedback loop (see hastily sketched graphic below), whose effects are the slow but accelerating destruction of those ecosystems which act as fuel for the process of non-stop growth. It is a fire burning itself out, its flames and heat are money and economic growth, its fuel is natural, cultural and spiritual resource. Therefore, only resource exhaustion, or, far less likely, a conscious decision, can stop it.



On the other hand, even before money and interest, there was human population growth. David Montgomery explores, on p30 of “Dirt, the Erosion of Civilizations”, competing theories of the advent of farming: oasis theory and cultural evolution theory, but is dissatisfied with both. He posits instead the idea that human population growth led to a need to get more food from settled land than jungle and wild can provide untended. Were homo sapiens sapiens not so inventive, our numbers would have stabilized. But our ancestors came up with farming, completely unaware of its long term effects.

“For over 99 percent of the last two million years, our ancestors lived off the land in small, mobile groups. While certain foods were likely to be in short supply at times, it appears that some food was available virtually all the time. Typically, hunting and gathering societies considered food to belong to all, readily shared what food they had, and did not store or hoard—egalitarian behavior indicating that shortages were rare. If more food was needed, more was found. There was plenty of time to look. Anthropologists generally contend that most hunting and gathering societies had relatively large amounts of leisure time, a problem few of us are plagued with today.” “Dirt: the Erosion of Civilizations”, Montgomery, 2007, p47.

 
Farming is hard work, radically alters one’s relationship to the land, and is uncertain in outcome – whereas hunter gathering is based on trust in nature's bounty, and 'day to day' rather than planing for the future – so needs to have been a forced decision. It must therefore have been a problem of increasing scarcity, or diminishing abundance, that forced humanity’s hand. The hunter gatherer pattern was to split a tribe that had become too big for its environment, and send one half in search of new, happy hunting-gathering grounds. Eventually this pattern hit a wall, especially when we consider glaciation and desertification over the relevant period. So Montgomery suggests food shortage forced an adaptation, forced humanity from the Eden of abundance/hunter gathering into the back-breaking world of farming and scarcity, ownership and competition, and everything else that has arisen as a consequence of that.

As time went on, the skills of hunter gathering were lost as more and more wild land was domesticated. Humanity became increasingly dependent on farming. We got better and better at it (shortsightedness to one side), and have over the millennia populated every corner of the planet with our progeny, though at great cost. Nevertheless, we are now at the curious point where scarcity-based progress is delivering a new abundance, albeit against a background of serious scarcity of fossil fuels inhibiting the perverse over-consumption we promote in the interests of economic growth. New technologies like the Internet, automation, hydroponics and permaculture tease us with abundance, whisper of a new egalitarian/high-tech combination, while the institutions we have built up over the millennia, along with our deeply held cultural expectations, ‘wisdoms,’ fears and convictions, combine to prevent us from recognizing the deeper opportunity our gifts have yielded. We can no longer carry on along the path of blind consumption-driven growth and embrace the new egalitarianism and abundance our best technologies offer us. Depletion of water, soil, ecosystems, oil, climate etc., in the interests of profit, mean we must stop growing as we have done, stop lauding growth as evidence of our superiority over, and dominance of nature (as if such a perception could ever make sense), and begin a new growth paradigm; growth of health, literacy, trust, wisdom, and so on.
 
It is not a return to primitivism I promote. While hunter gatherers were indeed embedded in nature far more than are we, they did not have sufficient global/universal awareness to expand their circles of reciprocity across the planet, let alone to other tribes – there were of course wars and other brutalities even in Eden. But time and technological developments have brought us to exactly that point, the point at which we are beginning to imagine humanity as one group. Ideas of transcending petty tribalism and the nation state are taken more and more seriously:
 

“Leaders of the world’s principal economies – both advanced and emerging – will need to reform co-operatively and deeply if the world economy is not to suffer further earthquakes in years ahead.” Martin Wolf, Financial Times, 14.07.10 [My emphasis. Hat tip Yves Smith, Naked Capitalism.]

 
A return to a co-operative, symbiotic way of life – hinted at by open-source software, Google, YouTube, permaculture etc. – one which includes as much of the universe as we can manage, is called for. This requires a totally new economics, one not attached to growth, and therefore with new ideas on both debt and interest.

So, on to my thoughts on debt and why we might do without interest. I’m coming to think of debt simply as ‘an owing.’ For example, if a friend does me a favour, I owe him one. I am in debt to him, perhaps not explicitly, and certainly not in a ledger, but in some important way. If he does me many favours and I never return them, the friendship will break down. The owing becomes too great, too one-sided. I suffer the loss from my life of the presence of a kind and generous soul, he is rid of a selfish bum who was no real friend. And note there is neither need nor room for interest, nor for a standardized accountancy, nor is any entrenched and calcifying social division possible.
 
Another example. If, as is currently possible with permaculture techniques, I set up for myself a jungle-garden – a self-sustaining ecosystem providing fruit and vegetables as jungles do, but in a garden format – and take from it the food I need to survive in robust health, do I go into debt to the jungle-garden? Does it keep score? Well, only if my taking from it is large enough to upset its ability to self-sustain. Then ‘debt’ in this example could be thought of as tipping a system into collapse. If that point is not reached, ‘taking’ is simply part of the process, the cycle of growth and decay. (I am not expert on jungle-gardens, and imagine input/tending is necessary, but the basic principle I briefly lay out here is sound. Humans had this relationship with the abundance of nature for tens of thousands of years, many still do. Did/do they know food debt? Perhaps in the form of gratitude.) Again, no interest needed, no accumulation makes sense, no scarcity or growth sought.
 
More fundamentally, is breathing monitored? Should we count breaths? For many reasons the idea is laughable. There is a co-operation, a symbiosis between oxygen-inhaling, carbon dioxide-exhaling species and their oxygen-exhaling, carbon dioxide-inhaling counterparts, that requires no accounting. To talk of debt and interest in this sphere is silly. Nature manages fine without it. It self-organizes.
 
With these three simple examples I want to point out that debt has different connotations in different contexts, plays different roles. Elsewhere in nature, food becomes waste becomes food. The process is cyclical. There is no waste systemically speaking. This is of course nothing new, and yet we so often fail to think these things through at the cultural level. Money-debt, as monitored and described by double entry bookkeeping, is linear, not cyclical. A bank loans money into existence and records the transaction as a debt/credit ‘zero’ on its books. When the last payment on the principle is made, the credit/debt entry disappears, and the bank keeps the interest. ‘Out there’ the borrower has competed for that money from the economy – which might have ‘grown’ as a consequence of this competing – by turning some raw resources into money. This ‘victory’ is matched by a corresponding scarcity in the overall money supply, though the bank experiences an increase in its reserves and can lend more. More loans are created, more resources turned into money, more scarcity, more competition, more debt, in a linear expansion onwards and upwards until collapse.

Should we cut profit-making from money-creation? Re-imagine government as the symbolic or institutional embodiment of the abundance of nature, as a jungle-garden-friend, birthed by The People, tended by The People? If not, why not? Why, as in accountancy, should a government go into debt simply for providing a medium of exchange in sufficient quantity to enable sustainable economic life? Surely only if we see money as a store of value. But money is not a store of value; you can’t eat it, drink it, or do anything with it unless all else is functioning well. Money is an abstraction or a representation of the relative value of other things. With this in mind, how can we believe we go into debt just by drawing pictures in the form of money to denote, for the use of exchange, the value of the economy generally? The economy is not made of money, economic activity is assisted by it. 
 
To carry on along MMT lines: if the money ‘printed’ or spent into existence by government enters an economic sphere built on trust and abundance at its very core, why should we need the accountancy practice of registering that spending as the ‘debt’ half of a double bookkeeping entry? Keeping track of things would require some sort of accountancy, but perhaps a new sort. In the absence of scarcity at the paradigm level, in the absence of the need for unending growth, in the absence then too of having to exchange 40+ hours labour a week to produce junk just so we can buy the things we need to live (plus more and more junk), surely the scary notion of a government printing money ‘like there’s no tomorrow’ fades to absurdity. It is the pervasive and penetrating fear of want and scarcity that forces us to think this way, to save for a rainy day, to see value magically stored in money, to compete with the other guy, to win, to accumulate, etc. This profound misperception is where the problem lies. Failing to recognise this misperception blinds us to viable, but radically different alternatives.
 
Instinctively we know there’s no such thing as a free lunch. Hence, we should not print money, or somehow spend money into existence without it costing something. Interest is both the cost of money (for borrowing) and the reward for the risk of lending it to someone. This argument makes total sense. But, implicit in it, as I point out above, is the assumption that money stores value. It does not. Real value lies in healthy soil, clean air and water, low crime rates, a relevant education and much else besides. It takes work and wisdom to create/sustain these things. If money is needed to lubricate the processes of creating/sustaining real wealth and lasting health (personally I suspect not), then so be it. But let it be a money that does so, not one that can only ‘work’ in conditions of perpetual growth, and that is created as debt.
 
I imagine debt making sense in some form (perhaps as commitment or dedication) for some areas of human existence, though not for all, perhaps making sense for some money types, though not for all, but usury making no sense anywhere. We believe usury to be essential if we are happy to pursue perpetual economic growth at any cost. When we begin questioning the validity of that model, the health and wisdom of that desire, usury makes less and less sense, until it appears we don’t need it at all. There need be no hoarding, no accumulating ‘wealth’, no pensions, no retirement, we can do with less human law and lawyers, less labour and more work, more community, open and curiosity-led education, no nation states but a rich variety of cultures bleeding into each other geographically, intellectually, artistically. We can create a very different world indeed, a progression from where we are now to something new. Perhaps the new way I imagine might be thought of as the end of elitism, as a New Egalitarianism. We have everything we need to begin this journey but the will to start.