Category: Uncategorized

Writing about money: an indecent practice?

In his book Wealth, Virtual Wealth and Debt (1926), Frederick Soddy writes p.291:

Of the existence of a real conspiracy – a conspiracy of silence – on all monetary problems, in the Press and on political platforms, among editors, publishers and economists, who more than any others ought to be alive and awake to their infinite importance – there can be no question whatever. It exists, and anyone who has tried to call the attention to the evils of the present system will affirm it. Mr H.G. Wells is reported to have said: “To write of currency is generally recognised as an objectionable, indeed almost indecent, practice. Editors will implore the writer almost tearfully not to write about money, not because it is an uninteresting subject, but because it has always been a profoundly disturbing one.”

Good thing we are not in 1926 and can publish without editors and publishers.

Saving our schools in SF: call for solution ideas

Tonight, I attended a community meeting focused on finding solutions to the school financing crisis in San Francisco.  There is a $133 million shortfall this year in the SF education budget, which is about 22% of the total budget for San Francisco. This gap will require inevitable cuts: 25/30 students per class instead of 22, 10% pay cut for teachers, no summer school, no field trips, 1 hour less of education per day (7 instead of 8), furlough days (no work/no pay) for teachers.

During the meeting, “money” came back many times. “How much money we spend on education” “The city does not have any money” “Find the money” “not enough money” “we need more money”, etc.

The designated culprits: corporations should not benefit from prop 13, which freezes property taxes based on the original purchase price. Also, the 2/3 majority requirement in Sacremento makes decisions about tax reform difficult.

As I explained during the meeting, money supply has been contracting and is scarcer than ever across the board. Individuals, small businesses, non-profits, cities, etc. everyone is hurting as a result. Given that states are not allowed to print their own money, without any help from the federal government, the only solution are either for special interest groups to show their political muscles in behind-the-doors discussions, or to learn to do more with less federal reserve money. I also don’t think raising taxes is going to be welcomed by the taxpayer, given that the problem is not that the taxpayer is not paying enough taxes, but that the taxes are basically massively misallocated to warmongering instead of education.

Unless the federal government steps in (by increasing interest-bearing federal debt to private banks, or reducing warmongering budgets), the only solution I see is for the community to work together to do more with less federal reserve money, while ensuring the right level of reciprocity.

I have some ideas about how a community currency could help address part of this challenge in our specific neighborhood, but I’m interested to hear ideas from the currency community.

On March 11th at 6pm, at the Bernal Heights Neighborhood Center, we will host the Bernal Economic Forum to discuss practical solutions to these budget problems based on cooperation between local businesses, residents and local non-profits.

If we cannot find a creative solution here in Bernal Heights to such a problem, I don’t know where we can.

Community issuance of money

I’ve been reading The Role of Money by Frederick Soddy, after Michael Linton inspired me by forwarding me this great Soddy quote:

Money is the nothing we take for something before we can get anything.

I hugely recommend this book and will try to condense some of his thoughts on this blog. Here’s a first thought this book inspired me:

Money must be issued as receipt for a voluntary gift of goods/services to the community, not as privately-printed counterfeit community gift receipts in exchange for forced, future larger real gifts to the private issuer. Following the latter model puts you on a course where the community’s debt has to always increase – sometimes to bail out the private money issuers – and inevitably concentrate in fewer hands, while forcing the endless privatization of formerly abundantly available resources.

The key challenge in such a model of community-based issuance of money is determining:

  1. what constitute a “gift of goods/services to the community”, and
  2. how to measure it.

2. is not big challenge. Even though gifts are made to the community, the largest part of the economy would still be free exchange based, providing a market-based valuation of gifts made.

1. is the key challenge. Certainly a gift of one’s time to clean up a nearby public park serves better the community next to this park, than the community miles away. This is where democracy – the online real-time one – and multiple currencies can really help: identifying unmet needs that the community cares most about, and validating them as worthy of community receipts when voluntarily providing gifts in the form of goods/services. Furthermore, separation of commons can be achieved by having an issuer i.e. a distinct currency in each community.

This can work at any level, neighborhood, city, county, state, federal, world, essentially allowing to pay over time the interest-bearing public debt with non-interest bearing gift receipts. Governance can be truly decentralized.

There should be currencies for those who don’t want to use the community-issued currency as medium of exchange, for instance asset-based, like e-gold.

Fractional reserve banking can be made illegal.

Many taxes could be ditched as well in generous communities. Some communities may require to have taxes paid, but would require them to be paid in their own currency, so as to ensure that not too much is issued and it gets recycled to fund new projects. Paying taxes would be done by either giving your time/goods in exchange of issued currency, or paying the taxes with local currency collected via exchanges with other local currency holders.

Banks can focus on narrow banking i.e. accounting, identity, security.

P2P lending in any currency, community or asset-based, can thrive. No problem in lending money as long as lending more than you have is illegal.

As a practical example, imagine a school in need of a bus+driver to go on a field trip. The community would vote this project as worthy of a receipt. A bus company would accept to provide the service in exchange for these receipts. They could use the receipts at accepting merchants. Merchants would be interested to collect the receipts since that’s what they could pay their local taxes with.

Thoughts?

The inevitable change in our monetary system?

Everywhere now there is the dawning consciousness among thoughtful minds that this age contains elements not understood or contained within the working rules of the older systems of government, economics, sociology, or even religion, and that it is due to new principles that have to be introduced into the base and can in no wise be met by a change in the superstructure of society. Even more remarkable, almost incredibly to those who have been hitherto lost voices crying in the wilderness, is the swiftly growing volume of agreement that it is the obsolete and dangerous monetary system that, primarily, is at fault. […] All are agreed that here at least change is inevitable, the only doubt indeed now being whether any part of the system, which through a lack of imagination as to what might have been is still apt to be described as having “worked well in the past”, can survive into the future.

This was not written in 2008 in the wake of the great financial crisis, it was written in 1934 by Frederick Soddy in his book The Role of Money. Here are many of us, almost 70+ years later saying the same thing. I really hope we don’t have to wait another 70 years.

Making moving your money easy

The move your money campaign has got a lot of visibility recently. Although the actual benefits of moving your money can be discussed, it seems pretty clear that it can’t be bad either for community banks and credit unions, since it will effectively do the job of breaking the big banks that the government seems unable to do.

Whether you agree or not with the impact of moving your money to smaller financial institutions, you will certainly agree that doing so is difficult.

If we put aside the transfer of loans, and focus on deposits, in particular checking, one hurdle is the fact that you may have given out your bank account number to a number of third parties for direct debit of various subscriptions: card insurance, health insurance, mortgage, etc.

How then can we make moving your money (almost) a one-click operation?

It seems to me that virtual bank account numbers may be an appropriate solution. A bank institution would issue virtual bank account numbers that you would configure to forward debit/deposit requests to a real bank account number. When you want to move your money, you would open a new bank checking account, transfer you funds to this new account, then re-map the virtual bank account # to the new account.

Such a virtual bank account scheme may also be used for managing relationships and preventing unauthorized access to your funds: you may be issued as many virtual bank account numbers as you wish and use each of them for each service provider who you want to automatically debit you. This way, you may decide to turn off a virtual account if you fail to stop the relationship with the provider in other ways.

A service provider providing virtual bank accounts could provide a centralized view of the automatic debit/deposit that you have agreed to, in VRM fashion.