The Future of Money Creation

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It is not hard for anyone to see that our current money system is experiencing difficult times. Even though interest rates are historically low, this still does not ignite the economy the way that the leaders hope. We are still in a deep recession, where youth unemployment is very high, companies are struggling, and where it is increasingly hard for anyone to create a life for themselves. Then on top of this, the situation in the middle east and Africa, is to put it mildly, catastrophic. The consequence is that refugees flood into Europe serving to destabilize the economy even further.

When investigating why our economy has become so weak, why we have so many structural flaws in our system, and why there does not seem to be in an end in sight, I have time and time again seen that these are strongly tied with how money is created in society. For those that do not know, money is created as debt. Commercial banks put out money in the economy, at an interest, when companies, and private individuals take out loans. This in turn means that there is ALWAYS a deficit of REAL money in the system, because DEBT accumulates without additional, new, debt-free money being inserted into the economy. We do not need a rocket scientist to conclude that this is bad math and also, big problems.

One clear and relevant example of how excessive debt can effectively destroy an entire country is that of the Greece sovereign debt crisis. Coerced by the financial powers of Europe to pay back its debt, Greece has now breached some of the most basic Human Rights there are. Pensions have been slashed and public jobs as well as salaries have been cut – the result is a disaster of epic proportions. And when we look at the reason for this destruction of human potential it all comes back to one thing – DEBT.

We should really ask ourselves why we structure our economy this why, because can we not find a better way? Does it not make sense to instead build our economy on debt free money, where countries are empowered using debt free grants to strengthen instead of being sucked dry of all life with the excuse that they owe money to someone, or something?

Having a money system that is based on debt creates extreme limitation, and at the end of the day, it only serves those few that are  in control of money creation, which is commercial banks. We have become so used to thinking that we must become indebted to buy houses, to receive educations, and to achieve a comfortable life, though this is ONLY a political structure – not a ACTUAL REALITY. Fact is that we could structure our money system in such a way where our governments issue debt free money that could be used to build houses, improve infrastructure and the general well-being of the public. Debt is fictional – a mirage created through laws – but in reality we all have an equal right to live a dignified life.

Investigate DEBT and the SOLUTIONS presented to this problem – the organization POSITIVE MONEY is offering a very cool solution – to implement this we require political participation – as it is through politics that laws are written and society is built.

Down below is an example of videos made by positive money that explains how banking works.

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Austerity Measures, Can They Be Justified?

Human-Rights-Greece1

In the aftermath of the 2008 banking crisis that incurred a massive economic destabilization on a global level, the neoliberal concept of ‘austerity measures’ have now reached the western hemisphere, with Greece and Spain as its more notable victims. In particular, the Greece bailout, which is allegedly a saving package, has imposed a myriad of conditions and restrictive measures on the Greece economy. The purpose of these structural restrictions is apparently to empower and stabilize the Greece economy, however, the opposite has happened, as has been documented in several high profile investigations.

The concept of austerity measures ranges back to the 17th century, and have more recently been adopted by the neoliberal economic doctrine as a way of dumping market failures on the state and indirectly, on the public. That austerity measures has the capacity of causing detrimental effects for the general public has been proven in Greece, and there is a history of failures with the so-called Structural Adjustment Programs imposed by the International Monetary Fund as part of their lending to developing countries, due to the conditions of austerity that these loans impose on the debtor.

Several independent sources indicate that austerity measures, such as cuts in public spending in the health, education, and other mechanisms of social security, creates human suffering on a widespread scale. With Greece, we have been given the opportunity to closely observe the social catastrophe that is created by austerity. The Truth Committee has noted that, unemployment has gone from 7.3% in 2008 to 27.9% in 2013. Youth unemployment reached a staggering 64.9% in may 2013. Due to cuts in public health expenditure more than 2.5 million persons, or one fourth of the total population of Greece, are without health insurance. Furthermore diseases such as tuberculosis, malaria and HIV have increased, and mental health problems have ballooned. Pensions have been reduced by 40 %, which have caused 45 % of Greece pensioners to fall below the poverty line. 500,000 people lives in conditions of homelessness, insecure or inadequate housing. To put it mildly, there is a humanitarian crisis in Greece.

What have been left out from the discussion on austerity measures are human rights, primarily the economic and social rights established by the International Covenant on Economic, Social and Cultural Rights. This convention is binding on the contracting states – and Greece together with the Eurozone countries has all ratified the convention. You would hence think, that in detailing the Memorandum of Understanding between Greece and the Troika, that contains the austerity conditions imposed on Greece, there must have been a discussion on the potential impacts on Human Rights that the austerity measures could create. However, there has not been such a discussion. Instead the EU member states, the EU commission, EU central bank and the International Monetary Fund have displayed a disregard for how the austerity policies would affect the Human Rights of the people of Greece. Court rulings by the highest Greece court that have ruled the pension cuts as unconstitutional and as a breach of Human Rights, have in the 2015 Memorandum of Understanding been referred to as ‘fiscal risks’. Such a use of vocabulary when referring to the Human Rights is nothing short of remarkable.

The United Nations Human Rights Council has adopted the Guiding principles on foreign debt and human rights in July 2012. According to paragraph 56 ‘Debt relief efforts must not compromise the provision of basic services. In particular, debt relief conditions that may adversely impact the realization of human rights or undermine development in the beneficiary State must be avoided’. The UN General assembly has in September 2015 adopted a resolution (A/69/L.84), which defines nine principles on how a debt restructuring process should be directed. Among these principles is the principle of sustainability, which implies that sovereign debt restructuring should lead to a stable debt situation in the debtor state, preserving creditors’ rights while promoting economic growth and sustainable development, reducing economic and social costs, ensuring the stability of the international financial system and respecting human rights.

Not surprisingly, these principles were adopted by vote and not by consensus, with the developed countries claiming that Human Rights should not be a consideration when it comes to debt and debt relief. However this position cannot be accepted as legitimate. Obviously Human Rights is and must be an important part of economical decisions, because the very foundation of economics is Human Beings. The consequence of separating economics from Human Rights is such perversities as slavery. Possibly, this is what the new era of austerity and debt has become, a more refined form of slavery, which is free from the moral constraints of its predecessors, because it is now justified with the slick vocabulary of neoliberalism and market economy. Though, when scrutinized, austerity measures are a soulless machine working for an anonymous creditor, fueled with the accepted belief that this is the way things must be. The debt must allegedly be paid back at all costs… because… well because, the market wants it that way.

To create a heaven on earth, it is clear that all forms of commercial agreements, debt contracts accounted for, must be able to be declared null and void if they happen to breach Human Rights. This is how it should have always been, and we must ask ourselves, why this has not yet happened. The United Nations has been around for 60 years, yet still, flagrant violations of Human Rights are allowed with reference to commercial agreements. What is missing; motivation, drive, integrity or compassion? And how come we accept and allow the life of countless human beings to be reduced to numbers on a balance sheet?

Clearly, there is a rift between the reality of our world, and the principles conceptualized in our Human Rights instruments. The process of making these principles a living reality will without a doubt be a challenging venture, yet it will be through the respect for Humans on a global level, that we will be able to create a world that truly worth living in. And let us not forget that there are solutions to these problems. Even though the massive bureaucracy that is involved can make us as individuals feel as if we are small ants facing the enormous Goliath, the system is comprised of individual human beings, like you and me. By standing up, one by one, and supporting a new direction in politics and economics, we will have an impact. In democracy we each have one vote, and that is how we will be able to shift direction, through coming together and unanimously voting for a new world that is best for all.

Micro Credits – A Solution For Poverty?

After the Norwegian Nobel prize committee decided to give the United States president Barack Obama the peace price, a president that later came to continue to war in Iraq, and also fund insurgents in Syria, I seriously started to doubt the reasoning skills of the members of this Nobel price committee. And after having watched the documentary ‘The Micro Debt’ by Tom Heinemann, I have concluded that the Nobel prize committee (at least those handing out the peace prize) do not know anything about what it means to create actual peace in this world. Because when they decided to give Muhammad Yunus the peace price, for having founded the Grameen Bank, and invented the concept of micro loans, and for thereby apparently having found a solution to poverty, they were obviously not using basic mathematics to assess the outflows of such loan methods.

Professor Muhammad Yunus, Nobel Peace Prize winner visiting theThough, before we dive into the basic mathematics of Micro Debt and whether this can be a solution for poverty or not, let me share the story of Muhammad Yunus, his bank, and the stories that has begun to surface about his money lending practices. It begins in 1976 when Yunus (supposedly) found out that small loans could make a disproportionate difference in a poor person’s life. According to Wikipedia, the first loans Yunus gave, made it possible for the borrowers to profit. Yunus business expanded, and by July 2007, his bank had issued around US$6.38 billion to 7.4 million borrowers.

As mentioned above, Yunus was awarded the peace price in 2006 for his efforts to create economic and social development. However after the release of the documentary ‘The Micro Debt’ the Bangladeshi government decided to review Yunus bank, and Yunus himself was removed as Managing Director of his bank. This is not particularly strange considering the claims that are made in the documentary, and the compelling evidence that it presents, that the micro debt is not at all a solution for poverty, but rather a trap, making the large amount of borrowers worse off than before.

Though in this blog I am not going to focus on Yunus and whether the claims made against him are true or not. My focus will instead be the concept of micro credits and whether these loans makes any sense; is it really possible to remove poverty through debt? The Micro Credit concept is not unique to Bangladesh; it has also become popular in South Africa, where it has created the opposite of poverty reduction. The following quote gives a stark description of the situation that unfolded.

”The microcredit-induced problems that emerged in South Africa are two-fold. First, microcredit per se is actually an “anti-developmental” intervention. For one thing, it exists on paper to support the smallest income-generating activities, but in practice is increasingly all about supporting consumption spending. In South Africa, the microcredit movement has created an incredibly risky and expensive way to support the immediate consumption needs of the very poorest.

With few poor individuals possessing a secure income stream that might ensure full repayment of a microloan – unemployment is now higher than it was under apartheid – many of the poorest individuals have been forced to repay their microloan by selling off their household assets, borrowing from friends and family, as well as simply taking out new microloans to repay old ones. For far too many now “financially included” individuals in South Africa, using microcredit to support current spending has been a disastrous and irreversible pathway into chronic poverty.”

Milford Bateman, Microcredit has been a disaster for the poorest in South Africa, http://www.theguardian.com/global-development-professionals-network/2013/nov/19/microcredit-south-africa-loans-disaster (2015-09-25)

euro-427528_640Academics and other proponents of the Micro Credit as a way out of poverty makes the assumption that the money lent will be used by the borrower to further his business. This however, is just that, an assumption. Most poor people are just as middle class people, not entrepreneurs, and do not have a very entrepreneurial relationship with money. The loan will be used to buy goods for immediate consumption, and will only serve to put more pressure on the debtor. In worst-case scenario, this will lead the already poor person, to loose the little safety they do have, when they are forced to sell their house to meet interest and installment payments.

Further, those borrowers that are indeed entrepreneurs, and that do invest their money in a business, there is nothing that says that these businesses will be able to profit. Nine out of ten startups fail – and that number will probably be even higher when not only you, but also all of your neighbors, decide to go out on the streets and sell the same thing – which did happen in South Africa.

Then we have the big problem when it comes to Micro Credits, the interest rates. On some of the Micro Loans that interest rate will be at 100 % or more. There is no startup that yields a sufficient profit to cover such a high interest rate. Conveniently for the creditors, most of the debtors are not proficiently literate, and will thus not really understand what they are signing.

Yunus was applauded when he was able to offer loans to poor people that cannot offer any securities in case they would forfeit on their installments. However, to ensure repayment of the loans, Yunus bank have developed a system of “solidarity groups”. It is these small informal groups that together apply for loans and its members act as co-guarantors of repayment and support one another’s efforts at economic self-advancement. Hence Yunus use the psychology of group pressure to ensure that the poor people are sufficiently motivated to pay back their loans. And even though this might seem innocent, in reality it has lead to the most horrific of consequences. One woman that was unable to pay her loan was pressed by her co-guarantors to take up prostitution as a way to meet her installment payment. That woman later poured kerosene on herself, and lit herself on fire. That is the effectiveness of group pressure when survival is in the picture.

What are we then able to conclude from all of this? One thing is clear: We cannot trust academics to know what is right! Even though they have a degree in economics, and even though they have received the Nobel peace price, that does not mean they actually understand how reality operates. Academics have their nose buried in deep books and because of that they will many times miss what is right before their eyes. Hence, we have to educate ourselves, and take responsibility. We cannot rely on a small intellectual elite to know how to solve such things as poverty – this is a problem that involves, and touches all of us, and accordingly it is everyone’s responsibility.

Then, the second thing we can learn: Change cannot come through DEBT. The very reason why we are living in a world where money is increasingly more difficult to obtain is because of DEBT. We live in a debt based system, and this forces us to work more – and even still there will/must be a loser. With debt, someone always loses; someone must be that poor guy that has to pay back the interest.

Real change will come through changing the structural design of the economic system – because only through changing the rules of the game are we removing this incessant fear of survival that is currently holding the entire human race in its grip. That structural change must involve giving all human beings a dignified life, real security, real safety, and easy access to money. This cannot come from debt, as debt is the very instigator of fear, anxiety and stress.

Hence, if you are interested in solving poverty, I suggest that you investigate the Living Income Guaranteed. This is an economical system that will revolutionize the way we think about money – and that is precisely what we need. We need something new, a brand new way of looking at things – a fresh start – free from debt and the old pessimistic ideas that apparently, poverty is unable to be removed from the face of this earth.

For more reading:

http://www.marlenvargasdelrazo.com/the-micro-debt-the-nefarious-business-on-poverty/#

http://www.theguardian.com/global-development-professionals-network/2013/nov/19/microcredit-south-africa-loans-disaster

Watch the documentary ‘The Micro Debt’

https://www.youtube.com/watch?t=791&v=yoAGKFaqwjM

https://www.youtube.com/watch?v=M6KHa4omGG8

https://www.youtube.com/watch?v=FdmXLpjykNk

Where Does Money Come From?

28goodman.xlarge1We tend to take the things most visible and obvious for granted and one of these things that very few people do understand properly yet that they are still in contact with on a daily basis is money. We all need money, we all work for money, and we are all dependent on money for our survival – but what is money? Where does money come from?

Most probably know that the printing rights to money in a country tends to be allocated with a bank that is called a Central bank. This bank has the permission to print money and spread it into the economy of the country. And this is really a fascinating aspect of how money works, it is really just paper that has some numbers printed unto it and there is no actual backing behind the money. There is for example no gold backing up the money – it is just paper with numbers dictating its value. This form of banking system is called a fiat banking system.

Thus these papers we call money do not get their value as a predetermined and absolute value. Instead money gets their value from those who use money in their everyday life in order to buy commodities and services. How we – the users of money – value money will become the value of money. As such the value of money is never stable but goes up and down depending upon how much money as been printed in comparison with the amount of commodities and services in circulation in society as well as the current demand for commodities and services.

This is then the absolutely fascinating aspect of money of which not many are aware. Money is created from NOTHING – literally – and then it is sent out in society and it is given a value – and most often it reaches the population in the form of DEBT. Because here is yet another fascinating aspect of money creation – there is an interest on all money that is printed, which means that there will continuously be less money in circulation than what there is debt that must be settled. This in turn leads to a debt spiral, where more debt must be acquired to be able to pay the old debts.

The conclusion is thus that we are indebting ourselves to receive money to have no intrinsic value in themselves – we are thus indebting ourselves to a life of servitude not realizing that the money printed and spread in the form of debt is not an actual and real measure of value – it is a artificial value that is created through make belief – a make belief that we make a reality because we believe in it and act according to it as if it is a reality.

The question we should ask ourselves is why we should require paying an interest on the money that is in circulation in our countries? Should not money be a property of the people? Should not we all have the possibility to be able to acquire food, education and housing without indebting ourselves?

The answer is obvious, because we all want to live without debt. This is why we require educating ourselves on the process of how money is created and in this understand that we as the people of each and every country are able to nationalize the banks and as such take control over our own money supply.

As I said in the beginning – money is created from nothing. It is merely papers with numbers printed unto it and nothing more. Why is that we then continue to hold unto to the belief that money is a scarce resource and something that cannot be owned in plenty by all?

In nationalizing the process of money creation we will be able to issue money and bring it into circulation and in this support new investments, and we would be able to end the credit crunch currently holding the world in a tight grip, simply because the money issued would not be in the form of credit, but in the form of REAL money with no interest attached to its back.

I thus suggest we nationalize our banks and make the process or printing and issuing money something that benefits the wellbeing of all instead of as it exists today – a seemingly endless debt spiral where more and more people forfeit and have their lives ruined.

Investigate the Living Income Guaranteed – our political proposal involves the nationalization of the banks.

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Debt Fueled Economy

ImageWhen the western economies fell apart during the great crash of 2008 something interesting happened over in China. Because Chinas economy is mostly based on exports to the west the course that was predicted was that Chinas economic growth would stagnate and follow the recession taking place in Europe and America. This though did not occur and instead the opposite happened – Chinas economy continued to grow exponentially seemingly without being affected by the turn of events in the west. Obviously, this is fascinating and opens up the question as to how China could direct its economy to continue to grow regardless of the massive loss in exports.

There is a great documentary giving the answers as to why China persisted when the west fell apart – and you can see it HERE. What is shared in this documentary is the secret behind Chinas success. The key is be found in one magic little word:

DEBT!

Yes – China used its banks to super-charge it’s economy through opening up the credit floodgates – allowing for a massive lending spree. The consequences of this grand debt injection can be seen in how entire cities, complete with their own subway system, skyscrapers and monumental cultural and sports facilities, are now sprouting out of what seems to be thin air – this is how fast and massively China is now pursuing it’s growth policies.

It’s really fascinating and in the documentary I referred to they effectively shows just how bizarre this building marathon have started to become. There are some small cities with just some hundred thousand inhabitants that by their municipality have been awarded state of the art theaters and music arenas, of the caliber that you’d expect to see in metropolitan cities such as London and New York. The local politicians have thus taken matters in their own hand and through debt managed to build what in a western country would’ve been unthinkable.

Obviously the debt-fueled economy China is pursuing is not based on supply and demand – instead it’s based on a incessant need for growth. Because without growth there will be diminishment in jobs, and without jobs the political elite of China will have difficulty retaining their positions of power. Thus, from a purely economic perspective, what is happening in China is not very effective as it’s not REAL growth, it’s not REAL commerce – it’s an inflated growth and commerce. Many thus fear that Chinas vast spending is currently creating a massive financial bubble that in the coming years will pop and cause havoc on a global level.

Though, the point I want to bring through in this blog is not whether or whether not the economic policies of China are effective. Instead I want to show the POWER of money – and how one through taking control of and directing the money supply of a country can amass massive resources in the form of workers and raw materials. This is in essence what China has done. They have taken control over the bank institutions in their country and instructed it to through debt support economic growth.

But wait for it, here comes the fascinating aspect of this story.

Imagine what we could do in our countries if we would do the same thing WITHOUT adding on the DEBT. Think about what the effect would be if we as the people would create debt FREE money with the purpose supporting the growth in our countries. Because what is really money but papers and digits? Thus we’d simply take charge of the papers and digits and distribute these throughout the economy to fuel entrepreneurship and economic growth. In the process we would simply decide to not create the money as debt. Simple!

Because one of the major issues with our current economy is DEBT and how almost all money that circulates is DEBT. This have the consequence of placing massive strain on the people involved as there just never seems to be enough money to go around, never seems to be sufficient with money to build one’s life and all the time seems to be to much DEBT.

Thus, consider how our life’s could change if we take control of the money supplies, if we nationalize the banks and make sure that the money inserted into the economy are without debt.

There is a political proposal that as a part of its reinvention of the economic system suggests nationalizing the banks. This proposal is called Living Income and it’s a solution for a world in dire trouble. We do not need to bailout the banks, we need to take control of the banks and make them an asset in the hands of the people, so that we can focus upon building a world that is livable and create a future for our children that is dignified.

Investigate the Living Income Guaranteed and make the decision to stand for a political solution that will make a real change.