If you could change one thing about the rules within which the legal/economic/political system operates, what would it be?
Cannot think of any single thing that would make any significant difference, but if I am allowed to change two things that are closely linked:
1/ Forbid the creation of money as debt; and
2/ Ban the charging of interest.
Most of the instability in the current mindsets of humanity would resolve if these two things were done.
It would be much easier then to create http://www.solnx.org
There is a very big distinction between individuals creating debt, which is then either satisfied by money or goods or services, and the creation of money in the first instance.
Currently money is created in two different ways.
Central banks (either private or public) create money, which is then introduced to the system as a loan to be repaid.
Banks can also create money, up to the limit of the current reserve ratio. Thus, in most western systems, each dollar created by a central bank, is further multiplied by private banks by factors between 5 and 10.
All of that money is simply created as book entries of debt, upon which interest is charged.
All I was saying is, that in the first instance, all money be created by the central body and spent into circulation (in so far as money needs to be created at all – which is only in a growing economy). Remove from other banks the ability to create money.
In theory, many of these loans are backed by securities, and the securities are valued on a market.
Accounting systems have moved to a system called mark-to-market, where valuation is based on the most recent marginal trade.
Marginal pricing in this fashion leads to cycles of boom bust, or bubbles as they are sometimes called. It is the logical outcome. In any market, there are always a few people who want something much more than anyone else. If the amount of a good or service on the market is kept at a level that the needs of this small group are never satisfied, then the market will rise. At some point the needs of this minority are met, and suddenly there is a drop in price, then suddenly speculators who bought on the upswing get scared, dump their goods on the market, forcing the price down even further, until the crash bottoms out.
The hard reality is that there is never enough money in any system to value the entire stock of any good or service at the highest marginal price – and any system based on such an assumption is clearly a scam.
The whole concept of the accounting system “mark-to-market” guarantees these cycles of expansion and contraction – boom-bust, and all of the human misery associated with it.
But those who like to gamble have fun trying to guess exactly when things will tip. For those at the top it is just a game. For those below it is literally life and death.
Lots of problems like this in our current capitalist systems.
They are not actually designed to promote human welfare, they have simply evolved to satisfy greed and lust (to a very large degree).
Forgiving debt doesn’t give a stable incentive either.
People who saved expect something back (that is what debt is).
One quite interesting approach suggested by an Australian economist (Keen) is to deliver a public dividend to every person, with a requirement that if that person has debt, the dividend must be kept by the bank and used to repay debt of that individual. Individuals without debt are free to spend it as they see fit.
This would serve to both reduce debt, and increase economic activity, without the obscene injustice of the sorts of bailouts of the economic system we have seen in the USA (and elsewhere) recently.
This is a little complex – it requires separating money from what it stands for.
Not all that long ago money was actually something of value, some metal – copper, silver and gold in most countries.
Then we introduced paper money, which was a promise to deliver so much gold to the bearer.
Then we removed that promise, and we are left simply with Fiat money – just a promise of value, but not actually anything (electrical patterns in some computer somewhere).
Many people still have the illusion that money has some value – but it doesn’t (not really).
Money only has value is so far as goods and services exist that can be bought.
But it is worse than that.
Money is a function that involves supply and demand.
If supply exceeds demand (a good working definition of abundance) then there is zero economic value.
Thus there is zero incentive in any economic system to deliver abundance to everyone.
When people produce a surplus, and sell it, and put the money they get from it into a bank as savings; they actually have two quite distinct sets of expectations.
One is that the bank will give them back their money, plus a little bit more.
The second is that there will be goods and services available to purchase with that money.
The process that is supposed to guarantee that those goods and services will exist is the free market.
The reality is, that there are the goods and service that there are, at any instant in time, and there is a capacity to produce, inherent in the people and tools that exist.
Now there are some really strange things in that mix.
Most physical things devalue over time.
If you put a truck load of tomatoes in a vault, and come back to get them 5 years later, you do not get a truck load of tomatoes plus some – you get a stinking mess, that might be useful for compost.
Similarly with most goods, their value diminishes.
Services have no value in a vault – they have value only if performed.
So why is it that we expect money (which is a proxy for goods and services) to be able to gain in value?
That can only happen if someone takes the money we deposit in a bank, and uses it in a way that allows them to create a surplus and pay more back.
Now the financial sector has essentially been running several variations on a theme of ponzi schemes; and some of them have crashed (the “sub prime” mortgages for example – a misnomer for outright fraud and deception). Here is a humourous take on what is happening in Europe – which is actually factual:
Yet the reality is, that we have a lot of people willing to work, and a lot of productive capacity able to produce.
Yet we don’t have the money to make it work.
Interest – it accumulates money into ever fewer hands.
When people get into trouble, they stop spending. This is a positive feedback on recession.
Once a recession really gets rolling, it is hard to stop from within the paradigm of money.
Seems like we are in one.
Seems very probable that it will get a great deal worse before it gets better.
Yet we have all this amazing productive capacity.
Communism failed because it was based on coercion (in practice).
Chinese communism works because the Chinese are pragmatic – always have been.
They have ensured that everyone is fed, and everyone is housed. People may not have money, and they are fed and housed. Theirs is a very interesting society. Taoism is ultimately about acceptance of whatever is. Ultimate pragmatism in a sense.
I gotta go – more another time.