An intellectual's review

[Unimatrix11]

Thanks Blake - good to know i am not entirely crazy (or at least not the only one ). I have calmed down a little meanwhile doing some modeling of the first few turns of a game of civ. Its far from being perfect and you cannot play it. No worker, no whipping and so on... And it looks so damned complicated, because the tool i used (PowerSim Constructor Lite) is not really suitable for descrete models - no objects with multiple properties (like tiles) - so each properties is a constant on its own... so its a clutterly mess... (i tried to clean it up a little tho visually) Have fun with it

Attached is a zip file containing a pic of it, and the actual model for PowerSimConstructor - i think you can DL a demo-version and run it on it, if you wanna do so.

P.S.: If someone knows a good, cheap tool which features what PSC lacks, i´d be really thankful for that info.

[wodan11]

All this talk is interesting, though it seems to me that every other post is someone or the other going off on a specific tangent. Not that that's bad, just that it's hard to tell whether the discussion is progressing or not.

From a big picture standpoint....

Every person, every organization, every business, and every government has an agenda. Usually more than one.

It's naive to think otherwise. It's also naive to think that we could change the form of something and that this would make everything "above board". That's not gonna happen.

Nothing is ever considered in isolation.

So I don't care if we're talking about banking systems, or systems of government, or two people interacting with each other.

About the best we could hope for is to minimize the ability of one "side" in any relationship to bring their own considerations into play. And/or to maximize the ability of the other side to call them on it.

Wodan

[Petrus2]

Originally posted by wodan11
All this talk is interesting, though it seems to me that every other post is someone or the other going off on a specific tangent. Not that that's bad, just that it's hard to tell whether the discussion is progressing or not.

From a big picture standpoint....

Every person, every organization, every business, and every government has an agenda. Usually more than one.

It's naive to think otherwise. It's also naive to think that we could change the form of something and that this would make everything "above board". That's not gonna happen.

Nothing is ever considered in isolation.

So I don't care if we're talking about banking systems, or systems of government, or two people interacting with each other.

About the best we could hope for is to minimize the ability of one "side" in any relationship to bring their own considerations into play. And/or to maximize the ability of the other side to call them on it.

Wodan

Yay I think that pretty much covers it in a nutshell!

[Blake]

Originally posted by Asmodeous


Pfft, Blake. Currency is neither good nor evil, it is simply a tool.

Like any tool, it can be used for great good or great evil, or anywhere in between in that range depending on the individual that weilds it.

Me.

You don't understand the nature of money.

But you are right that Currency is neither good nor evil.

I specifically said the banking/financial system for a reason. That reason, is dead pledge, or mortage, as it's called.

Having a medium of exchange is not inherently evil, dead pledge is.

There's a GOOD reason that usury (interest) is forbidden by every major religion. There are lame greed-centric reasons why it's been unforbidden by some religions. Religions, at least their prophet, tend to set rules such that people live Goodly, not Evilly. Dead pledge is not Good, it causes one person to have power over another, which is not Good. It's the enemy of equality. The prophets of the major religion recognized this, and forbade their followers from lending money w/ interest.

Modern banks are one step even more evil, because they don't even have the money to lend. They just create it out of thin air. Bank's loan out a lot more money than people put in savings, the savings are used as a reserve, but the actual lending level is much higher.

There's nothing inherently evil about a centralized currency system. It's when an institution is empowered to lend money it DOESN'T HAVE, at an interest rate, when the real evil stuff happens. Absurd power accumulation.

Anyone who is curious about what a currency system WITHOUT usury can look like, google LETSystem.

[jkp1187]

It'd be a hard sell for anyone to convince me that I'm motivated by greed .

Yes, well you would say that, emotionally and intellectually invested as you are in the success of your own arguments....

[Blake]

If someone could make me see that my arguments were wrong, I would be profoundly grateful to them .

Most people just don't argue with me. Either I come across as being mindbogglingly stubborn and someone completely unwilling to change his mind even in the face of compelling logic/experience, or they actually don't disagree with what I say .

[Petrus2]

Blake,
I don't see what you are claiming about mortgages that is inherently evil. You discuss other issues (e.g., usury) but not why a mortgage is.

I'd like to hear your reasons. Though I probably won't see them until tomorrow. Soon I head home. To my house. Or the bank's house, depending on your point of view!

[DirtyMartini]

Blake,

Isn't even lending without interest evil by your definition?

It still gives the lender power over the borrower.

[Krill]

Ugh...but if you don't lend money at the rate of inflation, then the lender is getting screwed over by the buyer, isn't he? So lending is by Blakes definition, either evil because of interest or stopid because of inflation

[Blake]

The financial system is so obfuscated that it's unfortunately not a simple thing to explain. It's not a case of where something can easily be considered to be evil, for example; Out of boredom, killing a child in front of her mother. Most people would say that's evil. By evil I mean, when any right-thinking person looks at the situation, analysis, it, looks at the motivations and intentions, they're going to conclude "Yeah. There's actually something majorly wrong about doing that". So if you accept my definition of evil - something most people will reject if they actually understand it, then we can proceed.

Usury itself is not particularly evil. And there's nothing wrong with having a "service charge", AS LONG AS A SERVICE IS ACTUALLY BEING PROVIDED.
I will provide a superior example which uses non-fiat mutual credit.

Say there's a grain farmer. There's a central authority (which is also a warehouse / clearing house) which is empowered to issue credit. There is demand for grain. There is a generally understood and accepted price for grain.
The farmer brings his grain to the clearing house. The employees inspect it, certify that it is quality, and put it in storage. They then say "Okay, that grain is worth 1100 credits. As usual there's a service fee, this will be 100 credits", the farmer is given 1000 credits for his grain. The service fee goes to paying the employees WHO ACTUALLY DID WORK, they inspected the grain and stored it away, and they'll maintain it until someone else uses credits (gained in a similar way) to buy the grain.

This is a system where the credits are BACKED, the credits the farmer gets are BACKED by the grain he put in the clearing house, it's not issuing credit from nothing. The fee for issuing the credits is not "free money" for the clearing house, it's to pay the employees who did real work.

The farmer can take his credits and go buy some services from other people, those people, the warehouse employees and the farmer himself, use some of those credits to go buy bread. The baker uses the credits to go to the miller and get flour, and the miller uses the credits to go to the warehouse and get grain. At that point the credits are uncreated as the grain leaves the clearing house, the credits have lived their natural lifecycle.
The credits are created, they circulate through the community, but they are always BACKED, they are not fiat.

Credits can be created in unlimited quantity, provided that people bring in stuff of value to other people, when goods which there is demand for are created, the credits to buy them enter the system.

Note that in this system credits which are in storage actually demurrage, they lose value over time. The credits which are tied to the grain, lose value as the grain decays. There is a penalty for just sitting on credits, encouraging people to properly circulate them allowing new wealth to be created.

This is a possible superior system which makes the whole fiat currency system look evil.

The credits come from a different place and the economic system works differently.

Note how loaning in this system works. Say the farmer really can't spend his 1000 credits, he might be able to spend 500 of them, but the remaining 500 are GOING TO ROT. So what does he do with them?????
He loans them! He gives them to someone else to use, who then creates some new wealth, the credits keep circulating. Once the someone else has created wealth, they can get some credits back (either by giving something directly to the clearing house, or buying credits). And then the farmer, can get all 500 credits back, instead of losing some of them to the demurrage charge - this is because by making the loan he allowed the credits to circulate and more people could afford to buy bread and all the grain got purchased, so there was no need for the demurrage charge.

This kind of system just works in a completely different way. It's absolutely resilient, the market can't fail. All credits are backed. If the credits fall in value, that's because the warehouse got physically destroyed or something - and it's right for the credits to fall in value in that case, they HAVE to, for the consistency of the system.

This is called "Community Currency", because it's not designed to work at a global level, it's DESIGNED to build strong cohesive local economies which are resilient, regardless of what the rest of the world is doing. In such a system it's still ENTIRELY possible to trade, for example the clearing houses could conduct trade themselves, at a barter level, or using a "Higher level community" - like a community of clearing houses, that would use a DIFFERENT currency, one which wouldn't be useful to most people in their day to day lives, for one it would only really trade in physical non-perishable goods, the stuff which it makes sense to ship around the country.


These little local systems actually start popping up when the global economy goes pear shaped. It's quite possible that if the global economy completely collapses, the community currencies will spread like wildfire, they can do that. There's no need for central banks. All that is needed is trust, anyone can set up a clearing house, as long as people trust that the clearing house really does receive and keep the goods for the script they offer. If someone is just starting up a clearing house (Starting to issue their own currency), they'd probably need to provide a lot of proof - like be very open to letting people inspect the entire system. While corruption is a certainty, it would tend to be kept in check, by virtue of the fact that a corrupt clearing house would quickly become known to issue worthless currency - if someone took the credits BACK to the clearing house, they wouldn't be able to get goods for them. So that clearing house would QUICKLY become shunned in favor of honest ones where the credits actually have value. Accountability is extremely important, for SURVIVAL, a non-accountable currency issuer just can't survive.

In this system, switching from interest-earning to demurrage accruing currency, results in changed investment behavior. Wise investment is critical.


What do I do in my life?

At the moment, the global economy is still strong, so simplicity dictates continuing to humor it. I DO avoid both borrowing money, and lending money at interest - those things ARE against my philosophy for life. Technically by even keeping my money in the bank, I am complicit, but simplicity does justify things. I would CERTAINLY never even humor the idea of living an investment lifestyle in this economic system, because that's VERY against my morality, I will make my living by my hands and mind, not other peoples.
Retirement wont be a problem for me, if there is no-one who is willing to take care of me out of accumulated goodwill, or if I'm not living in a monastery, then I've failed at life and it's time to shuffle. I'm fully prepared to make that leap of faith, that I can have enough positive impact on the world that people wont leave me to rot. I do that EVEN in this unkind world. "Be the change you want to see in the world" -- Gandhi.

Come such a time when the global economy collapses, I'm completely prepared to start rebuilding. I have no fear of a global economic collapse, because I personally know that a new system will arise and I can help make that new system arise. The economic collapse is required motivation, people aren't going to adopt a new system on ideological merit alone, but when it's a system which WORKS, when the old system is no longer working, THEN they'll definitely adopt it, and the more people who partake in a market, the stronger it gets.

So at the moment there's really no point on dwelling on the merits of Community Currencies, the "Good times are rolling". I DO think it's a good thing to understand them though, this is because literally anyone can start one of these things up and really save their community (and by virtue of that, themselves) from economic ruin.

If you feel like doing some google/wikicrawling, and expanding your worldview, here are some starting terms
"Mutual Credit" "Local Currency" "Complementary Currency" "LETSystem"

[couerdelion]

I really have to disagree with a lot of this. Part of the reason that I think the financial system comes under such criticism is because it is complicated. But nuclear physics is complicated. Computers are complicated. The general lack of understanding of the system is no reason for them to be bad.

First of all interest vs service charge. Interest is the price you pay for having money now rather than later. Given the choice, almost anyone would take the “money now” and this can be proved mathematically.

Let’s assume a given individual has the money now - call this State A. If they do absolutely nothing with the money, then they will have that money in the future – call this State B. However, they may choose to do something else with the money that will lead them to a different position – call this State C. Now let us place a value, from the point of view of this individual, on each state.

If Value (C) > Value (B), then the rational individual will choose to move to State C. Given that State A allows C or B then we have

Value(A) >= Max[Value(B), Value(C)]

So Value(A) >= Value(B)

In fact, the individual will probably have many choice for C and will try to choose the best from among them. Unless somehow has absolutely no uses for the money that will put them in a better position, Value(A) > Value(B)

Now this equation goes for everyone, including banks, so no-one will simply give money away now without some positive benefit in return while people who want money will be willing to pay something in order to get that money early. So we have something that people are willing to pay for and something that people require a price for providing. By the usual laws of supply and demand, a price will meet somewhere where supply = demand. That price is interest and it is paid purely for the use of the money itself and not for any service

At this stage someone will shout out something to do with charity being one example which breaks this rule. They might then use a perverse twist of logic which, by stating charity = good, imply that “not charity” = evil. Just in case this happens, I will add here that, not only is this logic completely false, but in fact charitable giving is not really an example of giving money with nothing received in return.

Now to the question of banks “creating” the money that it lends. The description given was perhaps misleading although it does describe the phenomenon that banks will lend out more than people deposit in it. This is simply because the banking system circulates money.

Let’s suppose a bank get’s a deposit of £1000. If that bank has to keep 10% of all money deposit as security it can only lend £900. But the person who gets this money will do something with it will soon end up in some other bank account. That bank, will then be able to lend £810 (keeping £90 secure in their vaults) and this £810 ends up somewhere else. Carrying this to infinity (but not beyond), the original £1000 will lead to additional lending of £9000 somewhere.

In fact we can go back to the first bank and shortcut all this. After the first £1000 deposit, they hold all of this back. This allows lending of £9000 from that bank so it simply borrows that money from another bank and lends it to a customer/business. The bank does not lend money it does not have although it does need to get money in order to lend it.

This multiplication of money is one reason why the banking system is so fundamental to the modern economy and why people are so well off these days. Yes, we are vulnerable if the banking system collapses but remember that we would not be here today (possibly even literally) if the banking system did not exist. I’m not even sure we would have industrialised without it let alone get to all the things in the modern economy that we now consider crucial

Talk of a new system seems odd really. Might as well just go an live in the country in a self-sustaining community.

[Unimatrix11]

Nice despcription of how it propels the economy there, which it does. It still cripples the national budget with its initial interest rates on loans given to the state, that have to attent to unprofitable "business", either as a legitimating to their existence, or even often in order to provide for the constant need for profitable application of capital induced by this system (e.g. colonialism in its various forms).

The more advanced this system is, the more it makes anything unprofitable impossible, for interest have to be paid at all times (you need a certain degree of concentration in order to be competetive). Effieciency is not an option, it is a must. All profit arises from work (now i dont even wanna go off on how that happens), and the need for constant profitable application of money means the need for work - even if it makes no sense to work other than that. That sounds contradictionary, but the key here is advertising - create demand ! You wonder why you have to watch all those stupid ads on TV ? Because you need to buy stuff cause if the money doesnt flow, then you will loose your jobs, which you need to do, not because anybody would really need what you produce, but because the very process of your work is the same one that creates the profit needed to pay the interests, and your boss doesnt even have a choice but to pay you a lot less than would be your share, if you do happen to produce something of actual value.

I dont think anyone can argue the need for the economy to constantly grow, for the national growth rate is regarded pretty much as the indicator of our wellbeing. Not the GNP is decicive, but the growth of which, because as soon as it becomes negative we loose jobs (which a lot of dont get re-created due to concentration and tech-advance in times of growth - today as true as 150 years ago). We are thus forced to (help others) accumulate. The degree in which the banks do accumulate (and concentrate) is in direct correlation to their power within this system, which does extend beyond the boundaries of the economy sooner or later.

Again - i never doubted the banks boost an economy. I just doubt their benefit to society.

[Unimatrix11]

BTW - in german, the words "guilt" and "debt" is the same (Schuld). Apparently the old germans had the opinion that it was one´s own fault if one borrowed money, and pushing it on someone else´s "shoulders" (very figurative, dont you think ?) is proverbial.

[couerdelion]

Originally posted by Unimatrix11
and your boss doesnt even have a choice but to pay you a lot less than would be your share, if you do happen to produce something of actual value.

But this is not true. The market for labour and the market for capital are the regulators which determine whether a business is profitable or not. Both are regulated by the usual laws of supply and demand and the price paid for each is at a point where supply = demands.

In other words, your pay is your share of what you have produced because you have agreed to accept that in return for doing the work.

OK, these is has to be a little bit of flexibility here. You don't simply work in one job one day and another the next simply because you get paid more. The job market is a little "sticky" and not liquid like the capital markets. So in order for someone to move jobs, they have to be paid sufficiently below what they are worth for a move to be worthwhile.

Put another way, if you are not getting a fair share, then you should apply your skills in a place where you get more.

[Unimatrix11]

When you are working for someone else for money, then you are selling your work, by the same laws you just decribed. Its bought by the same laws - if your work wouldnt create profit, meaning more (market-)value is created then you get, it wouldnt get bought (EDIT: and this includes the interests on the money that pays you). If you had the means to do the same work with the same effieciency and sell the products instead of your work, you´d either earn more, or you´d work less (which would actually become an option). Thats why capitalism, were it comes up, first destroys or takes away the means of production of people living on self-substanance (so much about, go live in such a community - they are under constant attack in a way - remember: need for constant profitable aplication and growth). Dependency is needed in order to accumulate. If people can live of their own products they dont have to sell their work (see the colonies again). If they dont do that, then there is no profit for the capital to create - interest cannot not be paid: recession - the economy shrinks. Bad, bad news. Really ?