Peningakerfiğ.
Nıta
hvern einstakling, og nota náttúruauğlindir á şann máta,
ağ allt efni gangi í hring, og sé
notağ aftur og aftur.
Viğ höfum oft á undanförnum öldum,
lent í miklum kreppum,
af şví ağ şağ var skortur á
peningum, til ağ greiğa fólkinu fyrir vinnu,
til ağ framleiğa vörurnar og síğan
er fólkiğ neytendur sem kaupir vörur og şjónustu.
Şessi grein er mjög lærdómsrík.
Egilsstağir, 06.01.2013 jg
by Roger Langrick
The Debt Engine is a phrase to describe unrelenting, forever increasing private and government debt. The need to stay ahead of escalating debt fuels practically everything we do; it forces us out of bed in the morning to go to jobs that most of us despise. Corporations make all their decisions around first how to service their snowballing debt, and secondly around profit. Governments spend all their time worrying about how to meet their social agendas while at the same time service the increasing debt load of deficit spending.
As a motivating force, the Debt Engine now exceeds all others in the insane dash of the planet towards self destruction. Universal unrepayable debt creates a social environment in which certain types of behavior flourish and inhibits or destroys any tendency towards long term concerns and nourishment.
Unrepayable Debt is
different than the everyday debt of normal life. Unrepayable Debt is an actual
built in flaw of our present monetary system: The Fractional Reserve
System.
It benefits no-one except those intimately connected with the banking industry and in spite of its devastating repercussions, it is a flaw that can be fixed.
Everyone has some ideas about money, who
controls it, where it comes from and how it operates. Some say the government
prints it; others say hard work makes money, while others would guess that it's
something to do with gold. They might also picture it as a vast pile with
everyone competing for as much as they can get. Bankers sometimes inflame our
passions by claiming that the government has grabbed all the money and there is
none left for private industry.
It's all poppycock.
Our money supply isn't created by the
government;
a brilliant idea doesn't make money
and neither does hard work (unless you
happen to be in the counterfeiting business.)
Our money is a national accounting
system of who owes what to whom,
and it is a system that is owned and
operated by the private banking industry.
There is no such thing as a static heap
of money created by hard work and business cunning.
Money flicks in and out of existence as
credit and debit balances; the money supply swells and contracts continuously
as loans are created and then destroyed.
Money is simply a bookkeeping system; a
man created device.
The
man who invented the monetary system which we use today was a Scotsman, John
Law, who lived during the 18th. century. He invented a
new type of money to replace the old one of specie (the use of coins). In doing
so he created the mechanism to finance the industrial revolution, and
ultimately our modern technological world.
Much has been made of the astounding inventions of that era but what is often forgotten is that most of them would have never have seen the light of day without John Law and his invention: the Fractional Reserve Money System.
Without it, there would have been no railroads, no Nissans
or G.M.'s, nor would there have been any super highways to drive them on. There
would have been no space shuttle, no
What John Law did with his invention of
a new money system was enable the Industrial Revolution, with all of its good
and bad aspects, to take place. Without him, the Revolution would have fizzled
and died and with it, our technological world.
Here was the problem which John Law solved. In the early 1700's the newly industrializing nations of the world were in a perpetual state of economic crisis because their coinage system of money could not keep up with demand. Governments tried everything to increase the money supply. One trick was to make new coins much smaller than the old thereby getting more per ounce, but it was a stop gap measure at best.
To grasp the magnitude of the problem, try to imagine building just one modern skyscraper using only gold coins as finance. The industrialists of the Industrial Revolution were faced with a similar problem; how to build their factories, mills and railroads using only scarce gold coins.
John
Law's solution was to create a national paper money supply; banknotes that
would be officially recognized as "real money". The advantages were obvious.
Paper money could be expanded indefinitely and was much cheaper than specie to
make. To get and keep initial public confidence, Law suggested a fraction of
gold be always kept on hand for the few people who wanted to redeem their
notes.
Through a process of trial and error it was found that specie could support about ten times its value in paper money. That is, a bank which held $10 in gold could safely print and loan out about $100 in paper money. The gold held in reserve was obviously a mere fraction of the banknotes which it supported and so the system became known as the Fractional Reserve System. The private banking industry was chartered by government to create the new money supply of paper notes. Until earlier in this century, banks literally printed their own supply against their own gold reserves with their name on each note, and lent them out to the public and government. Now the federal government has taken on the printing job but the notes are still drawn on private banks.
In
the 1930's the convertibility of bank notes was dropped but the Fractional
Reserve System is alive and well today, albeit in a more sophisticated form. Cheques or
credit cards have largely replaced paper money but the principle remains the
same; the banking industry creates the money which government and society then
borrows.
John Law's method of
money creation is still the dynamo that powers our present world. By replacing
specie with a simple national accounting system of credit and debit, he made
money infinitely more flexible, able to be contracted or expanded to meet any
situation.
However, using the Fractional Reserve
System has not been a universally happy experience. It has a built in
mechanical flaw that always keeps total national and private debt ahead of the
money available to repay it. In fact the more a nation expands, the more it
automatically goes into debt to the system over and above the money that it
borrows.
To explain, imagine
the first bank which prints and lends out $100. For its efforts it asks for the
borrower to return $110 in one year; that is it asks for 10% interest.
Unwittingly, or maybe wittingly, the bank has created a mathematically
impossible situation. The only way in which the borrower can return 110 of the
bank's notes is if the bank prints, and lends, $10 more...at 10% interest.
When presented with this scenario, there is often a tendency to think :"Ah, but the borrower can always make the extra $10 somewhere else, through hard work or a deal overseas." However, although we frequently inter change the two sayings, earning money is not the same as making it. Earnings are simply a transfer of money from on ownership to another and neither increase nor decrease the total money in existence. Making money actually does increase the nation's money supply but no-one can do that but the banking industry itself as laid down in its charter from the federal government.
The result of creating 100 and demanding 110 in return, is that the collective borrowers of a nation are forever chasing a phantom which can never be caught; the mythical $10 that were never created. The debt in fact is unrepayable. Each time $100 is created for the nation, the nation's overall indebtedness to the system is increased by $110.
The only solution at present is increased borrowing to cover the principle plus the interest of what has been borrowed. The business or government that cannot expand its borrowing every year is seized by its increasing debt load and dragged under.
Many economists are not unmindful of the problem but pass it off as irrelevant. They say that if the marketplace economy keeps expanding, thereby fuelling an increase in the total money supply, there is no problem with meeting interest payments on an increasing debt load. But under such circumstances, economic expansion is not a luxury but an imperative to stay ahead.
In John Law's day, the need to
continuously expand to meet growing debt repayments was seen as a minor problem
of no consequence. Today however we all know the planet cannot sustain
unlimited growth. Even so, we are stuck with a monetary system that demands
continuous expansion or face the chaos of total economic collapse.
The consequences of the Debt Engine are everywhere. Political and business leaders are sacrificing the planet to stay ahead of bankruptcy. Technology is not being used to create a sane and sustainable lifestyle for us all but is being channeled into the most narrow band of activity: the market place activity of "making" money. Just as governments are forced into ignoring vital social and environmental questions in their efforts to balance the books, so many corporations are putting to one side such things as resource depletion and the destruction of the ecosystem in their frantic efforts to remain economically alive.
But
the situation is not completely bleak. Just as John Law found a way around the
impasse of coinage, so there are solutions for the problem of unrepayable debt.
Obviously the first thing to do is make sure that the ratio of credit to debt
is always the same. Under the Fractional Reserve System, $100 credit is created
and $110 debt is demanded in return; that is, there is always more debt than
credit. This equation should be $100 credit equals $100 debt.
The mechanics of how to achieve this
were proposed over one hundred and fifty years ago. It was proposed that the
nation's money be created by two agencies: the banking industry and government.
Instead of taxes, government would be
empowered to create money for its own expenses up to the balance the debt
shortfall. Thus, if the banking industry created $100 in a year,
the government would create $10 which it would use for its own expenses.
Abraham Lincoln used this successfully when he created $500 million of
"greenbacks" to fight the Civil War.
A government which creates its own money supply becomes independent and the most important result of freeing government from its present debtor relationship to the banking industry would be to make it more able to respond to social pressures for reform. A financially independent government would be able to pursue long term agendas for the betterment of society. For instance, a twin source of money creation could not only rapidly reduce taxes, but create additional funding for other initiatives. A government having the same right of issue as is now monopolized by the banking industry could fund vital job creating initiatives such as environmental repair and sustainable technology on a scale that is hard to imagine.
The world has passed
beyond an age of scarcity and the challenge of the new era is not about solving
problems of want, but dealing with abundance and how to use it to create a
sustainable future. Above all we need the visionaries able to point the way.
In my forthcoming book Superproduction
I try to address the potential which is now in our grasp. With computerization,
robotics, advances in genetics and food growing, we have the potential to turn
the planet into a sustainable ecosystem capable of supporting all. We have the
technology to genuinely contemplate colonizing the solar system.
This is not a time to
be saddled with an 18th century money system designed around the endless rape
of the planet. John Law enabled humanity to scrabble out of scarcity but now
his system is antiquated. Philosophically it is based on the robber baron
mentality and technically it is flawed with Unrepayable Debt. As such it is
unable to respond either to the abundance which it created or the problems
which it spawned.
The Debt Engine has distorted the potential of the
Industrial Revolution and forced us into a narrow focus of marketplace ethic. A
new monetary system with enough government control to ensure funding of vital
issues could unlock the creative potential of the entire nation. By redirecting
the focus of our national economy, a new monetary system would enable men and
women who can think in terms of abundance not only for themselves but how also
to use it for the benefit of the entire planet. I know John Law would approve.
Roger Langrick
963 Maple St. White Rock
B.C.
(604) 531-1004
roger.langrick@dafbbs.com