Money Makes the World Go Down – part 3 of a #RealGreenRevolution

This is the 3rd in a 7-part essay on the type of policy innovations that would respond to the truth of the environmental predicament and, also, why most environmental professionals ignore such ideas to promote limited and limiting ideas instead. These ideas on a #RealGreenRevolution provide a contrast to current agendas, with the aim of encouraging a global environmental movement as a rights-based political force.  Having looked at taxation and market reform in the last part, here I turn to that even sexier topic of monetary reform and currency innovation, and how to transform the operating codes of our economy that to alter behaviours in fair ways.

To receive each part of the essay, subscribe to my blog, using the box on the right. To engage with other people who are responding to these ideas, either engage on the Deep Adaptation Leadership group on LinkedIn (where I will check in) or the Deep Adaptation group on Facebook, or by following the hashtag #RealGreenRevolution on twitter. The introductory Part 1 provides context.

Banking Transformation

Most people, including politicians, still do not understand that in advanced economies well over 90 percent of all our monetary transactions are not in government issued currency. Our electronic payments and the bank transfers use the private ledgers of private banks and the systems that they have established to transact between themselves. What we are paying and receiving are units of the bank’s commitment to us. The “money” that sits in our private bank accounts was not created by government but by the banks themselves when they issued loans, or (much less by comparison) took in physical cash deposits. The problem with our money supply being created by private banks is that they decide how much new credit money is created and what for. Therefore, in most countries they lend most of it for property, which warps the price of property and therefore creates a debt-enslaved ‘house owning’ group and others renting precariously month by month. In addition, because they charge interest, there is more debt in the world than money to pay it off, which means that the money must be earned, paid to service debts, then spent by the bank or its shareholders so to be earned again, in a cycle which is never perfect, especially when high levels of inequality mean that some people remove the money from circulation (by neither lending or spending it into the real economy). That means an expanding amount of loans are needed to keep the system running smoothly and avoid a scarcity of money leading to job losses, bankruptcies, loan foreclosures and house repossessions. Banks will only issue more loans for activities that they assess will generate the necessary profits to pay interest. Therefore, the economy must expand whether a government or population wishes it to, or chooses to focus on measures other than increasing GDP (gross domestic product). This compulsion to growth the money supply or risk economic instability is called a Monetary Growth Imperative.

Continue reading “Money Makes the World Go Down – part 3 of a #RealGreenRevolution”