Debt Money v. Banked Money – a Gold Problem

This is a post that continues a casual series about debt (here is the previous post).

Most money in circulation today only exists because someone took out a debt from the banking system, which promptly created the money from nothing. The simple way to express this is it is just like giving someone an IOU: If you want to trade with someone and you have nothing you can promise them something in return – so your promise is a debt to the person who gave you something of value in return for your promise. This is the concept of debt money.

Alternatively we can have money that is based on the value of something that is stored away. For example at one stage money used to be issued when you stored gold in a ‘bank’ (a bank being a store where things of value could be kept). Let’s call this ‘banked asset money’ – when you give the money to someone, they effectively become the new owner of the item kept in store.

I’ve commented on the problems of debt – that you become endebted to someone, you owe them and you are therefore controlled to some respect by the need to pay them off. However, most of our money in circulation is based on debt, by holding some money you are either in debt to someone (because the money is a loan) or someone else is (because the money is a loan).

It is my preference to not owe the loan myself, but to hold money that exists because someone else took out a loan and spent it and the money came to me (eventually). Is this a tacit acceptance of debt? Hmmm. I’m not sure that it is, but how about using ‘banked asset money’ where there is no debt at all?

The problem with ‘banked asset money’ is that there are loads of assets sitting in a bank doing nothing! Rather unproductive and inefficient. In this scenario it costs a lot more to have money because of the overheads of storage and the fact that stored stuff doesn’t get very well used.

I just had an email in about gold and the ethical problems of gold production. Much gold is basically stolen from the people of the country that it was mined in and also a lot of pollution is produced to create gold. If you have gold based money you are necessarily causing gold to be mined – as if you mine some gold you can exchange it for money. Using precious things as money tends to stop that material being used for useful purposes as it has an exchange value far in excess of its useful value (value to do something useful).

Most gold spends its time being valuable either as ingots or as jewellery (which has status because of its value) – only a small proportion of gold spends its time being useful – perhaps in electronic goods or dental fillings. (I’m basing this judgment of how gold is used based on this info: http://www.goldsheetlinks.com/production2.htm which states there is probably 3/4 of an ounce of gold per person and I reckon that an average person does not typically use that much gold for utilitarian purposes – I know that I have some electronics, but it won’t have that much gold in – therefore most gold must be used as a store of value instead.)

If gold is used to back money then we are poorer because it reduces the amount of gold being used for more useful purposes that would make us wealthier (in a practical way).

Storing grain instead of gold isn’t an ideal answer for ‘banked asset money’ either as storing grain has costs, unless you happen to be storing it anyway.

So using asset based currencies aren’t necessarily the right answer to the debt question.

To be continued…

Oil Be Going Now…

Seeing as the price of oil hit a record high a few hours ago (http://news.bbc.co.uk/1/hi/business/4399537.stm), I thought it appropriate to post an article which I wrote for the new edition of Benchmark Magazine (www.benchmarkmag.com):

Is the trend of man’s entire history about to be reversed? Are we going to start getting poorer instead of inexorably richer?

It is possible that the worldwide production rate of oil may have peaked in December 2004, that our supply of oil is slowing down, whilst our demand for oil is still accelerating. The absolute inevitability of this scenario, whether or not it is actually happening now, demands our attention.

In the UK today our energy use is at about 5KW per person. If we consider our waking day and how much useful work we do, then each of us has the energy equivalent of about 250 people working for us! Now, if the amount of oil available, per person, declines (which it is doing already, due to the increase in the number of people making more use of oil) then we become poorer. This is reflected by the price of oil going up faster than our income.

O.K. – so we’re going to become a bit poorer, so what? Well, whilst becoming a bit poorer doesn’t sound too devastating, it can be to a proportion of society. The norm in times of recession is that there is a decrease in consumer, and business spending, an increase in unemployment, bankruptcies and home repossessions. Decline isn’t pleasantly ordered, it is more a case of the weak being picked off!

So what is our responsibility as Christians? Well, unfortunately our responsibility was evident some 40 years ago or more – we have a responsibility to reduce our energy consumption, leaving more non-renewable fossil fuels in the ground for future generations. Instead we steal their wealth from them, while they are still unborn. Now, it is all the more urgent that we stop and consider the price that our children will pay for our greed.

However, aside from such idealistic hopes of reform, we must continue in our regeneration, where we gain control over our motives of greed and focus more and more on those around us. In our communities today people are living death. Our youth see lives devoted to slaving for their shelter with house prices so high that they are continually giving tribute payments to the older generation of ‘haves’. Let us open our hearts and minds to the injustices that we seem so blind to and give people an understanding of Christ’s love in practical ways that really mean something to them. Perhaps this is through charity, perhaps through fairness in trade, perhaps by sharing and perhaps it is through a change in our own consumer lifestyles.

Pimp my ride

I got my first dose of this MTV show today. Whilst i liked what they did with the cars, the positive use of the word pimp reminded me of a link to the F word site that had a great article questioning the corruption of the word pimp into something associated with style, fashion etc. It reminded me to post the link.

One by One

“Poverty is not so much the absence of goods but the absence of power� Robert Linthicum. We live in a world governed by the powerful, those who have power ascribed to them by the nature of where they live, where they were brought up and the education system. This power base is centuries old, is broadly governed by geography, the power and prosperity of the rich countries has been historically founded on the oppression and pillage of the developing nations. Take for example the Philippines, first conquered by the Spanish, colonialised, then the Americans using the islands for military bases, during which teenage prostitution grew into one of the countries largest industries. Now with differing priorities and cut backs the american military is leaving and being replaced by the new imperialists Taiwanese and Korean contractors setting up export processing zones (Kline).

Yet haven’t things changed people say? Aren’t we in the new age of enlightenment and growing social consciousness? History is a force to be reckoned with and a flow that will not be stemmed easily. In these prosperous countries’ systems and structures have been created that reinforce the status quo and protect the powerful, such as trade barriers, the International Monetary Fund and World Bank. It is these systems that are at the root of much of the inequality. Campaigns to tackle them have been underway for many years and whilst globalisation may have given rise to much of the current campaigning, it has also compounded the situation making change harder to achieve. These systems and companies have become huge mountains and walls that will not easily be moved. In her conclusion to No Logo Klein says “with globalisation there need to be some common standards and the governments certainly aren’t setting them� whilst this is the case, the question is where do we start. The anti-globalisation movement has pursued common standards, better employment conditions and fairer trade with some success. However when the issues seem insurmountable and the companies are so vast, we need to examine what is achievable. I have a number of questions which need to be explored and propose that alongside governmental lobbying for common standards ect that an alternative focussed approach based on radical community work theories and the model of community organizing should be adopted.

Continuing the wall analogy. The structures and systems as a vast wall, cemented together by companies many of which are now global brands. How do we take on knocking this thing down, many would say it is impossible. The minority of radicals want to give it a go and have spent a lot of time chipping away at the structures often attacking the high profile brands and whilst achieving some success the majority don’t see these successes. The majority however feel it is too big, don’t identify with the radicals, and say it cant be done. A final minority (often the powerful) fuel the argument it can never be done and protect the status quo. We all know that with enough people you could tackle the big corner stones and may even be able to push the wall down. Community Organising is based achieving change by growing a majority that can redress the power balance and thus tackle the issues. Community Organising would take a brick by brick approach, that with time and small successes can grow and take on bigger and bigger issues. What/ How many would it take on a small company first, giving them the option to trade fair or go out business? Could there be longer term view starting small and gaining momentum through small victories?
One By One.doc