Clarissa Hughes

Future Money: the solution to the debt mountain

The fact that world’s financial systems are in deep crisis is old news. Yet, despite being the subject of countless conferences, discussions and articles on MNY, how to fix the problem appears to have produced a deep torpor, even paralysis.

 

Current exuberant markets belie the fact that the underlying cause of the catastrophe still exists. Like the Loch Ness monster, it lies there deep in the murky depths. QE just shifted the problem; as if Nessie changed location to a much larger, more communal pond, where many more people are affected.

 

At the recent Freewheeling Future Thinking Festival Martin Wigand, former teacher turned investor, looked at the concept of Future Money as the way out of this pickle. Based on Rudolf Steiner’s idea of Exchange, Loan and Gift money, Future Money addresses the financial, social and environmental problems of the entire world. It has huge relevance in S.A.

“Without understanding and addressing the root problems of this financial crisis we will neither avoid climate change nor overcome unemployment.”

 

If we are sincere in our desire to fix this mess it’s imperative that we understand how money works.

 

Firstly, there is Purchase Money. It has existed for millenia and is the most basic type of money. It was invented when division of labour first occurred in society. In those days land represented wealth, not the money itself, which was merely a means of barter. Had we stayed with this kind of money modern civilisation would never have happened.

 

Then came Creative Money, illustrated by the story of the Goldsmith and the First Banker (very simplified version, but fun). In the Middle Ages merchants became the second tier of society, after landowners, to acquire wealth. This they amassed in gold. As one can imagine the secure storage of their wealth was a concern and goldsmiths provided this service. It didn’t take long before these merchants realised that trading in physical gold was hazardous and unwieldy; and so the deposit receipts issued by the goldsmiths became a natural substitute. The exchange of deposit receipts in lieu of gold became common. Then the goldsmiths got clever. They realised they could make loans against someone’s receipt even when they didn’t hold the physical gold. This was a crucial step in opening the door to unlimited money, unsupported by tangible assets.

 

The goldsmiths were smart. They knew they had to maintain the illusion of scarcity for the system to work. Their self-discipline ensured that it did.

 

By the mid 17th century the absolute monarchies of Europe were close to bankruptcy. Maintaining courts, not to mention countless mistresses and all manner of hangers-on, was expensive. Treasurers looked around for loans. Their gaze fell upon, you guessed it, the goldsmiths. Ha! What an opportunity that provided. Not only did the goldsmiths negotiate favourable terms but they also convinced the kings to decree that their receipts become recognised by all in the land i.e. legal tender. The kings, in their desperation to stave off bankruptcy, provided credibility for the goldsmiths’ receipts.

And so, boys and girls, this is how money was first created out of nothing.

 

Let’s jump to the present. To illustrate this magic money point further it’s good to remember that today only 5% of the world’s money is in printed notes. The rest is computer blips. Have you noticed how banks don’t go down to their vaults to check how much money they’ve got, when they give you a loan? All they’re interested in is if you can pay it back. Nowadays a simple double entry on a computer occurs, and pouff!, there’s your magic money. It’s not for nothing that it’s called fiat (let-there-be) money.

 

However immoral the creation of money may seem at first glance we must remember that without it we would never have achieved the current standards of living enjoyed by many in the world. Creative Money has increased entrepreneurship and improved productivity. Combined with scientific advances, Creative Money has led to societies of abundance, from societies of scarcity. This is the good side of Creative Money. It creates new wealth.

Unfortunately, it also has a shadow side, when it is used for egotistical purposes and greed. And this bad side is what has led to the debt trap and the current crisis.

 

Think of market speculators as an example. Do they create new wealth? No they don’t. They make money by exploiting, and even creating, differences. Arbitrage is the financial term, and someone else always has to pay. No new wealth is created. No wonder hedge funds are facing ever greater scrutiny.

 

The unscrupulous use of Creative Money has led to a mountain of assets on one side of the ledger, counterbalanced by an equivalent trough of debt on the other. The flow of money in the form of interest, from the indebted to the wealthy, is the cause of the rich getting richer and the poor getting poorer. The dismal fact is that 98% of the money in circulation is speculative. And so the grand task before us is to eliminate financial speculation from the system. The mooted Tobin Tax is a step in this direction.

 

That rising levels of debt in the world are unsustainable is a no-brainer. Refugees, terrorism, environmental degradation are the symptoms of inequality. However, they provide examples of dangerous downward spirals that affect us all – rich and poor alike. When debt grows faster than the economy, the wall is touching our backsides. Like right now.

 

So what can we do?

 

Firstly, we must recognise that there is no alternative to Creative Money. Debt is the basis of our modern financial system and waving a magic wand to disappear debt will disappear the system. So that’s not gonna work. What we can do, however, is to clearly understand the functions of Exchange and Creative money and use them correctly i.e. morally. Then we can look at Future Money as an offset against the one-way flow of interest that digs the Debt Grave.

 

Future Money requires personal introspection and honesty. It is money recycled in support of humane society. It’s not charity, as it contributes to the wellbeing of everyone on this planet. For those less charitable souls among us it can be visualised as a cloak of self-defence (personal security is closely related to refugees, terrorism and environmental stress). There are many large foundations out there investing in Future Money: from Shuttleworth to Soros, Gates to Getty. And as tempting as it may be to sit back and say, “Well let them get on with it, I’m only a little fish,” Future Money requires the buy-in of us all.

 

So how does it work for the likes of you and me? To start with you can base your financial decisions on values. For example, buy healthy food, support Fair Trade. You can invest consciously and responsibly. And when you give money, give it with your whole heart – not for what you get in return. You can also check your attitude to work. Do you work for money? Do you contribute to the Great Project of Humanity? Like I said, introspection and honesty.

 

One also needs to guard against speculative money masquerading as Future Money. There are plenty greedy, egotistical and speculative schemes dressing themselves up in Future Money clothes.

 

Money is not God made. It is a human creation that humans can use to improve their lives. Future Money not only protects us from greed and the fallout of the ever-widening rich-poor gap; it is the only remedy to the current debt crisis.

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