Day 240: A Bank for the People

We have an interesting point being taught in economy books - which is that an increase in investment spending has an expansionary effect on the economy - because money is invested in certain products and therefore, people are being paid or jobs being created, which means an increase in income, which means more consumption spending and so a multiplier effect sets in - because, in turn, consumption spending increases income, which increases consumption spending, where of course the increase each time becomes smaller and smaller and eventually 'dies out'. However, on the flip side - what is not spoken about in the text books, is how, at the same time as a multiplier effect is in progress - there is also a growing debt - because interest rates cause a debt to increase over time as well. And this debt, which is eventually a multiple of the initial loan, must be repaid, and so money again disappears from the economy, causing the economy to shrink.

So, within Living Income Guaranteed, we suggest banking will still be relevant from the perspective of big capital investments such as housing or cars. In some countries, we see a rising trend of loans being taken out, not for such big capital expenditure, but for day-to-day living costs, such as food and clothing. Such points will stop within Living Income Guaranteed, because one will be guaranteed to have an income that is sufficient to provide oneself with these basic necessities.

So - when it comes to loans, banks will herein make money through asking for a once-off fee rather than an interest rate - where this fee must cover labor costs and a profit markup - where the fee is reasonable from the perspective of what is required for banking to be profitable without creating a monopoly on money. And of course loans must only be undertaken if the capacity exists for the debt to be repaid.

The creation of money through fractional reserve banking would have to be revised and a way of money-creation be devised so that it stands in relation to supporting the rate at which the economy is growing - which must take into account population growth as well as available resources.

So - herein, banking becomes an actual life-support system where big investments can be paid over time and where it will increase and support the value of the citizen in terms of their life. And thus, the banking system becomes a means to truly supports economic growth as well as the growth in value of a citizen's life.

Related articles

• Money for Nothing: Switzerland Eyes a Basic Income Guarantee
• Switzerland's Proposal to Pay People
• Day 251: Living Income Guaranteed and Market Mechanics
• Day 226: Living Income Guaranteed will Prevent Destruction of Homes

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Day 124: Desperate Borrowing Behaviour

Whereas loans used to be mainly for big expenses, such as buying a car or renovating a house - personal finance research unit head, Bernadene de Clercq explains how South Africans have resorted to borrowing from credit providers to pay for food, transport, medical bills, school fees and electricity bills.

Prices of electricity and fuel have increased significantly over the past few years - which is a factor that was not taken into account at the time when loans were taken out. This resulted in a situation where people are now unable to pay back their debts - leaving them little choice but to create more debt in order to provide for themselves.

This is obviously a big problem because no-one can get out of a hole by digging the hole deeper. The situation is exacerbated by the fact that electricity prices are expected to continue rising with an annual increase of 16%, and this for the coming 5 years.

Inability to pay back debts will cause more and more to resort to crime to provide for themselves, which will further jeopardize social and political stability - while appropriate use of the word 'stability' is already questionable.

South Africa is on a dangerous roads - where investors are starting to shy away from investment opportunities, fearing that the economy and state will collapse. A cutting of investment spending in the South African economy will hamper economic growth and further aid its downfall - causing prices to drop, unemployment to grow and crime to rise more...

An Equal Money System will not allow money to determine who gets what, loans will not be necessary, no one will be a slave to debt and entering crime to provide for oneself will no longer come up in anyone's mind. We live in a messy, chaotic world where everything is continuously changing and threatened with instability and even collapse - we don't have to live in a world like this - we are choosing to through the simple thought that 'we can never change what is here'.

This one thought is our God as it dominates our lives and in the name of this one thought, we allow billions to suffer every day - while there is a way - a simple way - educate yourself at www.equalmoney.org and bring out your vote!

Related articles

• Day 94: How is Money Created?
• Day 118: Drop in Agricultural Farmland Threatens South African Food Security
• Day 85: Financing Government Expenditure
• Day 110: Evilution - Neocolonialism
• 106: Structural Adjustment

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Day 110: Evilution - Neocolonialism

This blog is a continuation to:
Day 98: The Unholy Trinity
Day 99: Money Votes
Day 102: Liberalism
Day 103: Abstract Equality
Day 104: We have to Protect our Freedom!
Day 105: Human Liberties
Day 106: Structural Adjustment
Day 107: Getting Reality to conform to an Illusion
Day 108: Virtual Democracies
Day 109: Politics as a Double-Faced Game

Let’s have a look at why many countries who are under Structural Adjustment Programs, came to turn to international institutions like the IMF and the World Bank.

Most of these Third World Countries had been previously colonised by the West.
During this time, the colonised countries’ existence was only relevant to the Colonising country in so far that it could use it for resource extraction or trade benefits. During the colonial rule, a lot of changes took place in terms of the colonies’ infrastructures. Infrastructures were built in relation to the country’s function, and like we just mentioned, this function was to serve the colonising country.

So any and all infrastructures built in these countries, were built to direct the flow of resources towards the West. Most of the time, these infrastructures were focused on only a few goods, like cocoa, tobacco, coffee.

So what happened after independence?

During the colonial rule, all these countries were submerged into the international economic/money system – they were now part of the game. When the colonial rulers left, they had no choice but to continue playing the game – the ties were already too much ingrained. So now they had to come up with a plan to be able to continue to play the game. Unfortunately, the only infrastructures in place in these countries in terms of international trade, were those to serve the West. So even though the colonial rulers left – these colonised countries still continued to play the exact same role after colonisation. Considering that there were many of these countries, and many of them focused/specialised on the same goods/crops – they were now competing with each other to get their goods sold to the West, which forced them to lower their prices as much as possible just to get their stuff sold.

Previously during the colonial rule, the occupiers would finance much of the country’s development that would further trade. Now that they had left, these third world countries were left with nothing. The only thing they could do to ‘kickstart’ their economies = was to borrow money.

Every since then, many of these countries went into Debt and have so far not been able to repay it.

The loans they get now, are conditional as seen in Day 98 and Day 106 – where not only these countries are at the mercy of the West economically – but now also have to conform politically. So in essence, nothing has really changed. Just through money, a new form of ‘indirect’ colonialism replaced the older ‘direct’ colonialism – but countries are still being exploited.

Look at it simplistically:

The West comes and colonises Third World Countries. They take their resource and built stuff which only serves the West. Then they go away and leave the Third World Countries alone, and let them plunge into massive Debt just for the sake of survival. But the only reason why they had to go into Debt, was because of the actions of the West.

I mean, it just doesn’t make any sense!

We call ourselves ‘civilised’ and ‘evolved’ – but we’ve really not changed at all, we’ve just gotten better at covering up what we do and make it sound more acceptable – while it is totally NOT.

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Day 107: Getting Reality to Conform to an Illusion

This Blog is a continuation to:
Day 98: The Unholy Trinity
Day 99: Money Votes
Day 102: Liberalism
Day 103: Abstract Equality
Day 104: We have to Protect our Freedoms
Day 105: Human Liberties
Day 106: Structural Adjustment
 

 I forgive myself that I have accepted and allowed myself to have created an opinion as an ideology where apparently ‘freedom’ stands central and where ‘equality’ is valued – yet this ‘freedom’ and ‘equality’ is nowhere to be found/seen – as my opinion/ideology only values particular resources such as money, skills and talent – where these are not equally distributed among the population and so this result in inequality and lack of freedom as one can only do so much in this world when one is limited by money

I forgive myself that I haven’t accepted and allowed myself to see and realise that this ideology is only an opinion I have created in my mind – where my values work for me, where I was lucky to have been born in an environment where money and skill was made available to me through having been born in a family with money and thus having had access to education – and where I have taken this point and made it universal, where if I can do it, anyone can do – and so if one does not make a ‘success’ out of themselves, the reason for this must lie in the character of the person as them being ‘lazy’ – without ever stopping for a moment and seeing/realising that not everyone is born into an environment where money and education is available – and so what works for me might not (and most of the time, will not) work for others

I forgive myself that I have accepted and allowed myself to have taken my opinion which I did not practically test out / challenge in physical reality and turned it into a grand-scale opinion as ideology – and then used money as a way to enforce this ideology on others – where if others want to have money to help themselves they must comply to my ideology and so they go and comply to my ideology which has no relationship to how things actually physically, practically work in this world – but since they see no other way of getting money, they will place themselves in this precarious situation as no choice is left

I forgive myself that I have accepted and allowed myself to believe that if my ideology/opinion works for me – it should work for everyone – without actually investigating whether it is so – where I then go and impose my opinion which is a made-up illusion, unto reality and try to get reality which is real to conform to my opinion which is an illusion – which then obviously only results in the abuse of reality in the attempt to change/mould it into something which it cannot be – where millions of people pay the consequence, since my opinion as ideology is being imposed on entire countries and their population

I forgive myself that I haven’t accepted and allowed myself to see and realise that my opinion/ideology only works if you have money –and thus if one goes and impose this opinion on an environment which lacks money: the consequences are disastrous


I commit myself to show that our current economic system as values is merely based on ideology as opinion and is not rooted in actual physical practicality

I commit myself to show that traditional economists are not interested in providing actual solutions which work for everyone but are only interested in preserving their opinion as illusion and trying to impose this on reality and try to get reality to conform to an illusion which is practically impossible

I commit myself to show the importance of dealing and sorting out one’s opinions as when these opinions turn into ideologies which get enforced/imposed on a massive scale the results/consequences are disastrous and completely unnecessary

I commit myself to show that our current economic system is based on opinion and does not consider what it actually means to support Life on Earth and so I commit myself to the abolishment of our current economic system so we can make way for a New Economic System rooted in Physical Reality instead of opinion so we may finally have an Economic System of support in place

I commit myself to show that if opinions are left unchallenged, the consequences can be deadly

I commit myself to show that unless the human as human nature change – we will remain in fucked-upness – as the nature/reality of opinion on a personal scale has not yet been properly investigated/challenged but instead been protected and defended in the name of “freedom” – and where this unchallenged point manifests in a bigger scale as an ideology which is left unquestioned and has disastrous consequence but yet no-one will speak up in the name of “freedumb”

Related articles

• Day 103: Abstract Equality
• Day 139: The Rapture and True Activism
• Day 137: FREE Choice and True Activism
• Day 96: Individual Above Group?
• Day 146: Synchronicity and Natural Selection

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Day 80: Monetary Policy - Part 3

I commit myself to educate people in what money currently exists as and showing that money itself is a scam and that those who benefit from the scam are obviously not the 'common man', but the few elitist groups such as bankers who are able to suck all the money towards themselves while ripping the common man from his money, his car, his home, his children's tuition fees and all that's required to live a dignified and fulfilling life.

I commit myself to see through the charade and assist others to see through the charade of the apparent generosity of banks in trying to 'help you out' by giving you a loan - where something that doesn't belong to them is lended to you and where you, on top of that, have to pay a fee for their apparent generosity because they're taking 'such a big risk' in giving a helping hand - instead I commit myself to show how, if each puts in the effort, with many willing and committed hands, we are able to provide each one with all necessities and commodities that are required for each one to attain their fullest and most absolute expression as life.

I commit myself to design an economic system based upon life, for life - where, if a mistake is made - it is realised that it is just that: a miss-take - and that the necessary support and assistance requires to be provided for a person to learn to make more educated and informed decisions that will adequately support them and their families - where it is common sense that a person cannot be judged on missing a take, but requires to be forgiven and requires to receive another chance - so that with each miss-take, a person sees and realises the opportunity to grow and expand themselves - instead of seeing mistakes as something that must be avoided and something that causes each one to live in continuous fear - because one cannot 'afford' to make mistakes due to the mercilessness of of greed.

I commit myself to stop considering myself as an individual being that only has to think about his/her own needs - but to realise that I am part of the human race, part of this world, part of life - and as such, I am not only responsible for taking care of myself, but of taking care of my fellow human beings and all fellow life-forms that we share this Earth with - and thus I commit myself to push for a new world of equality and not stop until all beings are taken care of and provided for in a way that allows them to discover and realise their full potential as an inhabitant of this physical planet.

I commit myself to living in this physical reality and stop entertaining fiction such as thoughts, beliefs and opinions - so that I can realise what truly MATTERs and so that as I, within this realisation, take responsibility for all of the physical reality - make sure that it does not suffer under the dominion of mind-creations of personalities, opinions, self-definitions, desires and wants - but to instead focus myself and my entire beingness within the physical as the true God - who, despite continuous abuse and despite our slaughtering of its children, has never stopped supporting us, has never abandoned us and has kept on taking the hits and blows of our delusions.

I commit myself to educate people in understanding real care and real love by pointing at the Earth that is here, still waiting for us to realise that we are a part of it - and not stopping until it is entirely destroyed by human kind - and thus, I commit myself to face my fears and stop my selfish desires so taht I can assist in avoiding the disaster of the end of Earth and the destruction of our chance to manifest Heaven on Earth.

I commit myself to show people that we are not in fact waiting for God, that we are not in fact waiting for saviours to ascend us to heaven - but that we are only waiting for ourselves to leave our selfishness behind us and work together towards the creation of a real Heaven - not somewhere up in the clouds or in a different dimension - but right here on Earth - with that which is already here, already available, but waiting for us to be seen, to be realised.

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Day 71: The Money Supply - Part 1

What is 'Money Supply'?

The money supply refers to the liquid assets that are held by individuals - it includes coins, notes and demand deposits (cheque accounts). What notes and coins are is clear - but what are demand deposits? If you have a cheque account in which money was deposited - the bank has to pay out deposits in cash on demand, or has to transfer it immediately on demand to another bank or account holder. So - demand deposits - the money in your cheque accounts, is as good as notes due to immediacy with which the money becomes available. The money supply, in simple terms, refers to all the money that is in circulation in an economy, that is available to individuals to purchase goods or services with.

Why does it matter how much money is in circulation?

The amount of money available in circulation has an influence on the prices of goods and services. Remember the following from the blog-post 'Inflation - Part 1':

"In other words - whenever the amount of money in circulation increases in an economy, the prices will go up. Check: the more money is available in an economy, the less it is worth, which is reflected in higher prices - because with the same amount of money in your pocket, you can now purchase less stuff, which means that your money is not worth as much as it used to anymore."

If the money supply keeps on increasing - so will prices - and the result will be inflation. Why?

Because - more money in circulation means more money available to people to buy goods and services with. In other words: the demand for goods and services goes up. If the demand for goods and services goes up (more people are willing and able to buy goods and services), so do their prices.

What factors influence the Money Supply?

1. Banks

The supply of money can be increased by increasing either the amount of notes, coins or demand deposits. Banks play a crucial role within the latter: banks have the ability to create money by increasing the amount of demand deposits.

The question, then, is:

How are demand deposits created?

Firstly: if a person deposits, for instance, $100 in banknotes with a bank, the bank will in return give the person a cheque book, which will give the person the right to write out cheques to the value of $100.

Secondly - and more importantly: Banks noticed that the demand deposits held by them were never all claimed/withdrawn at the same time. They would always have demand deposits 'laying around'. They figured that, instead of leaving the money to collect dust, they could lend this money to other people and charge interest on the loan. This means: the bank would give money to people who hadn't put money in the bank beforehand.

In the First case, nothing actually happened to the money supply: $100 was deposited into a bank - and thus removed out of circulation. This means the money supply decreased by $100. However, the bank issued a cheque book of the value of $100, thereby again increasing the money supply by $100. The money supply before the creation of the demand deposit is thus the same as afterwards.

In the Second case, however, the money supply does change. Using the same amount as an example: Someone deposits $100 into a bank. The bank issues a cheque book of $100 - the money supply balances out. However, of the $100 deposited, the bank decides to lend out $80 to someone who needs and seems creditworhty enough (showing the capability to pay back loans). Now the money supply has increased with $80. At first there was just one person with $100 in their pocket, after the bank did its magic: there was one person with a $100 cheque book and another person with $80 of credit.

Is there a limit to the amount of money a bank can create?

Although small, there are limitations to the amount of money a bank can create.

At any time, a bank must have sufficient cash reserves to be able to provide for cash withdrawals. Secondly, a bank must be able to provide for claims of other banks. What does this mean?

Remember our example of someone bringing in $100 in his bank and receiving a cheque book of the value of $100. If this person writes a cheque of $100 to his landlord, the landlord will go to his bank to cash the cheque and receive $100 for it. The thing is that the landlord's bank and the bank of the person who wrote the cheque, are not necessarily the same one. A bank must therefore always make sure that it is able to provide for the claims of other banks.

Individual banks don't decide how big a percentage of received deposits they keep aside in the form of cash reserves - this is the job of the monetary authorities: the central banks.

Let's say that the central bank dictates that at all times a bank is obliged to hold 2.5% of their total demand deposits in the form of cash resrves. We say that 2.5% or 0.025 is the 'cash reserve ratio'.

Taking again our example of someone depositing $100 at his bank - what implication does a cash reserve ratio of 2.5% have in terms of limiting the bank's ability to increase the money supply?

Firstly - consider what would happen without there being a cash reserve requirement:

Step 1: A person (Person A) deposits $100 at the bank and receives a cheque book of the value of $100.
--------> Money Supply: Nothing changed
Step 2: The bank lends out the $100 that was deposited to someone else (Person B).
--------> Money Supply: + $100.
Step 3: Person B deposits the $100 at his bank and receives a cheque book of the value of $100.
--------> Money Supply: still + $100.
Step 4: The bank lends the deposit Person B made and lends it out to Person C.
--------> Money Supply: + $200.

As you can see - the process could just keep on repeating itself until an endless amount of money is created.

What happens then in case of there being a cash reserve ratio of 2.5%?

Step 1: A person (Person A) deposits $100 at the bank and receives a cheque book of the value of $100.
--------> Money Supply: Nothing changed
Step 2: The bank keeps $2.5 dollars in reserve and lends out $97.5 to someone else (Person B).
--------> Money Supply: + $97.5
Step 3: Person B deposits $97.5 at his bank and receives a cheque book of the value of $97.5 in exchange.
--------> Money Supply: still sitting at +$97.5
Step 4: Bank keeps 2.5% of Person B's deposit in the form of cash reserves ($2.44) and lends out $95.06 to Person C.
--------> Money Supply: + $192.56

As you can see, with each deposit, the amount a bank can lend out decreases in comparison to the initial amount of $100. There is thus a limit to the amount of money that can be created this way. We can actually calculate how much money will be in circulation if this process is continued until there is nothing more to lend:

$100 * 1/0.025 = $100 * 40 = $4000

The initial $100 that was in circulation, the fractional reserve banking system (which is what this banking system is called) can turn into $4000 in circulation.


We continue on the subject of the money supply within the next blog.

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Day 20: The Insanity of Economics - Food Aid Does Not Help the Poor

I forgive myself for not accepting and allowing myself to see and realise the insanity of how the economy works if a country wherein half the population is starving, exports 65% of its food produce to richer nations.

I forgive myself for not accepting and allowing myself to realise that the rules by which the game of economics is currently played is actually killing billions through hunger and starvation because it makes more 'economic sense' for local farmers in developing countries to sell their crops to other countries that can actually pay the higher price of their crops than to feed the local starving community.

I forgive myself for not accepting and allowing myself to realise that donating food to developing countries does not serve them and only serves to suppress my own guilt for accepting an economic system to create a situation where people starve in a world of plenty - because poor people will accept donated food or food that is sold at a very low price from donating countries rather than to buy food produced by local farmers, which completely destroys the local agricultural economy, leaving the developing countries dependent upon the rich to feed them, while there is sufficient and rich arable land to cultivate their own food and farmers with the know-how to do it.

I forgive myself for not accepting and allowing myself to realise that in my attempt to suppress my guilt through a quick-fix of donating food rather than looking for and supporting long-lasting sustainable solutions - I am actually killing people.

I forgive myself for accepting and allowing myself to believe that donating food to the poor starving children is a noble act because I believe that this is what starving people need - without looking at the actual implications and consequences of food aid and how it merely perpetuates dependency on rich countries and therefore perpetuates underdevelopment, including poverty and starvation.

"Some years back, a keynote speaker at the International Famine Centre at Cork, Ireland, detailed how maize was loaded on ships bound for Britain at the height of the great Irish potato famine that killed some 1.5 million people more than 150 years ago. He paused and then lamented: “I wonder what kind of people lived at that time who were not even remotely offended at the sight of millions dying of hunger in the same village where the ships were being loaded.”"
— Devinder Sharma, Africa’s Tragedy; Famine as Commerce, November 10, 2002

I forgive myself for not accepting and allowing myself to see and realise the insanity of the current economic system if a country where 1.5 million people are dying of hunger, loads ships filled with maize and exports them to Britain.

I forgive myself for not accepting and allowing myself to realise that the same kind of people live in our time under the same economic principles, where countries with starving populations export their food produce to other nations because the own starving population is too poor to pay for it.

I forgive myself for accepting and allowing myself to force poor countries to remove any import tarrifs and trade barriers in order to receive financial assistance in the form of loans to aid their economy and then dump excess food produce in those countries, destroying the local food markets and aiding only the donor and exporting countries.

"Of the 830 million hungry people worldwide, a third of them live in India. Yet in 1999, the Indian government had 10 million tons of surplus food grains: rice, wheat, and so on. In the year 2000, that surplus increased to almost 60 million tons — most of it left in the granaries to rot. Instead of giving the surplus food to the hungry, the Indian government was hoping to export the grain to make money. It also stopped buying grain from its own farmers, leaving them destitute. The farmers, who had gone into debt to purchase expensive chemical fertilizers and pesticides on the advice of the government, were now forced to burn their crops in their fields.

At the same time, the government of India was buying grain from Cargill and other American corporations, because the aid India receives from the World Bank stipulates that the government must do so. This means that today India is the largest importer of the same grain it exports. It doesn’t make sense — economic or otherwise."
— Anuradha Mittal, True Cause of World Hunger, Institute for Food and Development Policy, February 2002

I forgive myself for not accepting and allowing myself to realise and see that starvation and hunger is not a result of a lack of food, but a lack of money and a sly game of politics that serves the economic powers in the world.

I forgive myself for not accepting and allowing myself to realise that charity and food donations will never stop world hunger - only a new economic system wherein each one is provided for unconditionally as the starting-point for the distribution of resources will make an end to this atrocity.

I commit myself to show how charity and food donations to poor countries don't help poor countries get richer, but instead dooms them into a downward spiral of dependency and helplessness.

I commit myself to show the hypocrisy of rich nations for demanding of developing countries to remove all trade barriers as a way to stimulate economic growth, while those rich nations themselves used extreme protectionism to gain the wealth they have today.

I commit myself to show the insanity of the economic system where in order to survive, farmers sell their crops to nations who don't need them while allowing the local population to starve.

I commit myself to show how slavery is very much a contemporary problem where poor countries are literally economically enslaved to the rich to do their bidding.

I commit myself to supporting and establishing a new economic system where common sense replaces insanity through founding the economy on the principle of what's best for all rather than 'every man for themselves'.

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