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Wages lag production so debt is required. The banks in this article are everywhere because they have a monopoly on credit creation and demand interest.

Take 5 minutes to read this, it articulates what the author failed to (and as a result reached a conclusion of little use):

http://www.socred.org/index.php/blogs/view/it-s-time-for-an-...

Think of the banks everywhere. They are today's churches. Big spacious lobbies. Stand in awe not at the creativity but at the sheer amount of high value real-estate they can waste.

The guy writing this article doesn't understand the wider dynamics at all. It's about money creation and the use of that to ramp land prices in order to compel everyone to hand over part of their labour.

As you note if you have money you can get more of it because you can leverage it. But that's only part of the picture.

I'd encourage everyone to read the above link and also Henry George "progress and poverty"

http://www.amazon.com/Progress-Poverty-Industrial-Depression...

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It's about money creation and the use of that to ramp land prices in order to compel everyone to hand over part of their labour.

If you could point me to a single bank president who says his goal is to "compel everyone to hand over part of their labour," I might find this believable. Otherwise it reads like an Us vs. Them Marxist diatribe. Red meat for the proletariat, no different than the Tea Party.

I agree that there are systemic forces at work, and that they should be changed, but it's silly to impute dark intentions.

It's not very fair to say "I'll only believe that an esoteric motivation exists if the party motivated by it explicitly states that publicly."

(By esoteric motivation, I mean either an "underlying" motivation or an "epiphenomenon" that feeds back onto itself.)

It is not necessary to acknowledge or even to know that you are behaving as part of some esoteric motivation, for it to be either a true or at least useful model. For example, think of "selfish gene" type explanation of reproductive / behavioral biology. That is a useful model for thinking about behavior even if the parties themselves talk about courtly love, religious morality, etc.

Particularly in the case of a highly developed financial economy, there are lots of decisions that have effects, which effects tend to reinforce making those decisions, without anyone explicitly talking about those effects.

For example, the political decision to create and maintain the tax-deferral advantages of e.g. 401k accounts, is bipartisan and widely touted as helping to advance the cause of retirement security and broad prosperity. However, in a very real way, it's also about shunting vast quantities of "dumb money" into a relatively high-fee intermediary industry of 401k administration, mutual fund management, and etc. In turn, those intermediaries employ vast numbers of well paid personnel, as well as enjoy concentrated financial returns to their ownership -- and the owners and workers of the intermediaries lend massive poltiical support to perpetuating and extending those types of program (see e.g. the successive creation of more and more favored account types: Roth IRAs, 529s, Coverdell ESAs, HSAs, FSAs, etc. etc.). This means that Congress is compelling the nation at large to turn over a higher % of GDP to financial intermediaries.

It would be disingenuous to claim to disbelieve this unless a Senator stood up and said his goal is to "turn over a higher % of GDP to financial intermediaries." That is certainly not his exoteric goal and probably not even something that he thinks about. But it is a very real consequence, and the feedback loop from the beneficiaries (lobbying, jobs, contributions) most certainly influences him and makes it "about" that.

> It's not very fair to say "I'll only believe that an esoteric motivation exists if the party motivated by it explicitly states that publicly."

I'd go further: it's plain daft.

> It's not very fair to say "I'll only believe that an esoteric motivation exists if the party motivated by it explicitly states that publicly."

Who said it has to be explicitly stated publicly? There are thousands of lawsuits every year and millions of pages of testimony. That's why you can point to Jeffrey Skilling or Bernie Ebbers or George Madoff and say "those guys are frauds." But you can't just point at bankers and CEOs as a class, and with no evidence, claim to know what they believe in their hearts.

> It is not necessary to acknowledge or even to know that you are behaving as part of some esoteric motivation, for it to be either a true or at least useful model. For example, think of "selfish gene" type explanation of reproductive / behavioral biology. That is a useful model for thinking about behavior even if the parties themselves talk about courtly love, religious morality, etc.

Very good point.

To give an example- oil companies advocate for the continued use of fossil fuels, because it is in their financial interest to do so. At the same time the employees of those companies have an interest to not screw up the planet completely for their own children and grandchildren. It's not as if those people are part of some dark conspiracy to destroy the environment, but they do seem to be trapped by the forces of the economy into which they have to participate.

Basically, you don't really need an "esoteric motivation" to have totally evil behaviour. You just need to be at the wrong position in the wrong organisation.

I agree that systemic forces are at work, but implying that people at oil companies or banks or other big institutions want "compel everyone to hand over part of their labour" adds more heat than light.

And if you actually want to change things, yelling "evil!" at the people you want to change is a terrible strategy.

Is it dark intentions when the nature of a company is to make as much money as possible? The banks want house/land prices to go up so that they can charge one as much in interest as they can get from one's income, whilst making money on any land/property capital appreciation that they have. This is just capitalism surely.

My solution - nationalise the mortgage lenders and cap the mortgage to a 3 * multiplier of annual earnings.

Thank you for having a brain. You'd also need to have a new way of issuing money as mortgage lending is how we currently add fresh money as debt. I'd recommend something like social credit.

> If you could point me to a single bank president who says

Why do you think they would say what their true goals are to you? People in positions of power are extremely judicious and strategic about what they say and to whom. They get daily exercise in this and only the best survive. The most effective are excellent at pursuing their goals while maintaining a socially credible exterior. The less effective use coded language (corpspeak or political rhetoric) to try to hedge through via indirection.

> Wages lag production so debt is required.

An alternative would be for wages to not lag production, and for the ultra-rich to make less money.

This isn't what social credit is about. Even if you add up all the wages that go to the rich it's still less than the value of the goods produced, hence the need for debt to fill the gap.

I agree I'd like to see far less inequality BTW.

The ideas of social credit definitely have some merit, though I think it's important to flesh out how it would be implemented, as there are clearly risks if it's implemented poorly. For example, how would you guard against over-consumption?

Would be interested to hear your thoughts on the Positive Money campaign, I believe you'll be interested in it.

http://positivemoney.org/

In the current system, you have to get money by convincing other people to give it to you. There are plenty of flaws in that which we know all too well, but I couldn't find any description of how "positivemoney" was actually supposed to work, only lists of problems and appeals for donations. There were no descriptions of what it would do to actually solve the issues in the text.

Their description of the problems with debt is particularly confusing because it's not clear how they intend to avoid any of those things. There seems to be a lot of concern about numbers shown in bank accounts and no concern for what happens to production of and access to goods and services, which is what's really important. The comments there are more interesting than the main article: http://positivemoney.org/issues/debt/

> "I couldn't find any description of how "positivemoney" was actually supposed to work, only lists of problems and appeals for donations. There were no descriptions of what it would do to actually solve the issues in the text."

Thank you for the feedback about the website. I've been attending Positive Money meetings close to where I live, I'll be sure to raise those points at the next meeting I attend.

With regards to the plan, I'll try to give a short summary. I would say there are three central ideas, the rest of the details follow on from these ideas:

1. Control over how much money is created would be moved away from those with the power to spend it.

2. The group in charge of creating money would base their decisions on how much new money to make on economic data, for example keeping unemployment low.

3. The money that was created would be debt-free. Interest would not need to be paid back to the creators of new money.

I can go into some of the implications, but before then do you have any questions about the three points above?

1) Money is created by giving out loans (fractional reserve banking), so I assume you're talking about some other way of creating money. What, exactly, would you do to the Fed to change governance?

2) I believe that's already a goal, though there are certainly perverse incentives. How does this plan correct those incentives, specifically? I'm looking less for goals and more for action plans.

3) This sounds like bitcoin, but I don't see how you can abolish the idea of debt entirely or even why that's desirable. Say I don't have enough money for food (or whatever). If I don't even have the option of going into debt, I starve?

I could see more use for something like debt horizons or forgiveness (i.e. debt expires after a time), but we more or less have this already with bankruptcy, though obviously there are plenty of flaws in that. And then it's hard to get anyone to give you more money because, well, you've already shown that you probably won't be able to pay it back.

I do find some fundamental disconnects on what money is, though. It seems like the idea conveyed there is a simple number in a bank account, but in actuality it's far more complex than that. Ultimately the numbers on your account aren't what's important: access to goods and services is. There are also issues with the idea of trying to rate limit everyone from becoming "too rich." You might prevent future Rockafellers, but you'll also get rid of future Elon Musks.

It seems more useful to prevent people from falling off the bottom than trying to shave off the peaks at the top.

> "1) Money is created by giving out loans (fractional reserve banking), so I assume you're talking about some other way of creating money. What, exactly, would you do to the Fed to change governance?"

Let's look at this in more detail, as it's clear I haven't explained the plan well enough yet.

First, I should clarify the Positive Money campaign I linked to is about money reform in the UK banking sector, but the general ideas can apply equally to the US, even if the implementation details would be different.

Okay, so let's look at the situation in the US. Money in the US is generated in two different ways:

1. Federal Reserve generates money for the US government to spend through the sale of government bonds.

2. Banking system generates money through making loans.

I'm going to leave the problems with the current systems for the time being, so let's skip to what we would change if we wanted to have a single central body in charge of new money.

Firstly, you would take the power to create money away from the banks. Banks could only lend money they had available to lend. This could work through lending out the savings of other bank customers, with customers able to choose how much or little of their money they wanted to invest, and what risk/reward ratio they wanted to have with their investments.

Secondly, you would want to change how money reached into the economy. If banks couldn't create new money, who can? Should government take on this role? The risk with giving governments this power is they might end up printing more money than is needed in order to fund extravagant government projects. How do you get around this?

If the Positive Money ideas were applied in the US, you wouldn't have the Fed selling bonds. In some sense the Fed wouldn't exist. What you'd have instead is one central, transparently-run group controlling how much new money was created, which sets the budget for the government to spend. All new money would be spent into the economy through government programs. There would be no need to sell bonds, the money would be created without debt (i.e. without the need to pay interest to groups willing to buy government bonds), it would simply be new units of exchange available for use in the economy.

Any questions on the above?

Who is the transparent group? How are they held accountable? Aren't they a de facto part of the government by virtue of being able to govern the flow of money, whether or not they're a de jure part of the government?

What is the incentive structure and how does it penalize gamesmanship? How is the group ruled and why can't 51% of it say that we want to create all of the money for ourselves?

Aren't people already paid for using their money as loans in the form of interest rates and being able to structure how and when the money can be withdrawn (money market vs. savings, etc.)? What advantages are there to this? How do you get banks to offer that and what does the average guy like me even know about trying to control the money supply?

And even in that case, don't you still run contrary to the goal in that those with larger amounts of money still manipulate the money supply by choosing investments?

> "Who is the transparent group? How are they held accountable? Aren't they a de facto part of the government by virtue of being able to govern the flow of money, whether or not they're a de jure part of the government? What is the incentive structure and how does it penalize gamesmanship? How is the group ruled and why can't 51% of it say that we want to create all of the money for ourselves?"

The group may be appointed in a number of different ways, though I suspect it'd be mostly down to standard job hiring, with some key positions appointed by government. If it helps, I imagine it'd be similar process to how judges are appointed.

However, it's important that the money creation group not be part of government. Furthermore, they do not dictate the flow of money, but rather the amount of new money. Any attempt for a non-elected body to control how money is spent opens up a whole host of potential problems. Instead, it is the government that would decide how new money would flow into the economy, i.e. what that new money was spent on.

In terms of gaming the system, there's always a risk of gaming any system, but it's important to be clear that the decisions on how much new money is available and how that money is spent are being made by two different groups of people. Let's put it like this, if you wanted to game this particular system, how would you do it?

> The group may be appointed in a number of different ways, though I suspect it'd be mostly down to standard job hiring, with some key positions appointed by government. If it helps, I imagine it'd be similar process to how judges are appointed.

Isn't that more or less how we get the membership of the US Federal Reserve? https://en.wikipedia.org/wiki/Federal_Reserve_System

Also, it's not clear what "not being part of the government" means if some positions are politically appointed. I suppose you're saying new ones can be appointed but old ones cannot be removed, but then that either makes it a lifelong post (which sounds worrisome as they'd be a prime target of corruption) or someone else decides their removal (based on what?).

> Any attempt for a non-elected body to control how money is spent opens up a whole host of potential problems. Instead, it is the government that would decide how new money would flow into the economy, i.e. what that new money was spent on.

I'm having trouble understanding this because the sentences appear to contradict each other in part.

> Let's put it like this, if you wanted to game this particular system, how would you do it?

I'd have to understand it better, first. But in general, a corrupt person would divert the supply of money to flow to them or people who would give them kickbacks (buy their stuff, hire their friends, etc.). They'd divert money away from whatever groups they did not like (political, religious/atheist, minorities, you name it). They'd use control of supply to direct flow to favored media outlets and away from those critical of them. I'm sure there are plenty more evil things to do that I haven't thought of, as well.

> "Also, it's not clear what "not being part of the government" means if some positions are politically appointed."

Are judges in the US legal system part of the US government?

Yes, they're part of the Judicial branch, established by Article III of the US Constitution [1]. Not all judges are Article III judges with the protections mentioned therein, but all judges are part of the government on some level. You can see some measures to establish independence from the other branches as well as accountability if you read the section. For the subset of judges that are Article III judges, their wages cannot be reduced and they have a lifetime appointment "in good behavior" (which means they can be impeached for misconduct). What you won't find in the text is anything about judicial review of laws. The court came up with that doctrine on its own in Marbury v. Madison. [2]

[1] http://www.archives.gov/exhibits/charters/constitution_trans...

[2] https://en.wikipedia.org/wiki/Marbury_v._Madison

Though I see you're talking about the UK now (something you may want to make clear on the site), just to provide a cite on #2 with respect to the US, I find that's explicitly the case for the US Federal Reserve:

"The U.S. Congress established three key objectives for monetary policy in the Federal Reserve Act: Maximum employment, stable prices, and moderate long-term interest rates.[10] The first two objectives are sometimes referred to as the Federal Reserve's dual mandate."

Given that it seems you want to recreate something like the Federal Reserve for the UK, I'm curious about which parts of the system you want to reuse vs. change.

[1] https://en.wikipedia.org/wiki/Federal_Reserve_System

> "Though I see you're talking about the UK now"

There are similar monetary reform movements in the US, the one I linked to just happened to be driving for change in the UK.

With regards to recreating the Federal Reserve, you could argue that any central bank has a similar role to play, and the UK already has a central bank (the Bank of England). In some ways, you're right, that is similar to what is being proposed, but there are some key differences. Let's use the US system as an example again.

The money in the new system would be debt-free. This is a very important part of the system. Central banks like the Federal Reserve would not be accruing more debt just to do their job (for those that may be thinking having that debt is good, a decent chunk of US taxes goes into servicing that debt, effectively paying off the interest on a loan you didn't need to take out in the first place).

Not only does it take the debt burden away, it also allows greater flexibility with economic strategy. For example, in the current global economic system we go through cycles of activity. When the economy is booming, more money is created, facilitating easier trades. However, in times of recession, the money supply shrinks (or rather the flow of available currency shrinks), making trades harder just at the time when more money would be useful to help the economy recover. Instead what you want is a money supply that can expand even during a recession, and that's easier to arrange by using debt-free money guided by a central authority.

Transparency is another key difference. It should be possible to follow most/all of the debates shaping monetary policy. Correct me of I'm wrong, but we don't seem to have this level of insight into the inner workings of the Federal Reserve.

What does "debt free" mean exactly? I see a few options, but I'm not sure what you're trying to forbid:

  * I can never promise to pay someone back in the future?  
  * I can never draw on more resources than I have?
  * I can borrow money and never pay it back?

This first is doubtful, because you mentioned loans earlier. The last is the case currently, via bankruptcy, but there are serious limits on it. Otherwise no one would ever want to lend money--someone could always just abscond with it.

[Edits: better formatting]

To understand what debt-free money is (and to address how the US money system currently works), I'd recommend this video:

http://youtu.be/iFDe5kUUyT0

Please note that although there are a couple of subtle hints in the video about returning to the gold standard, the video can still be of use as a general introduction into the US money system even if you don't think that's a good idea (I don't think it's a good idea to go back to the gold standard).

Hope the video can be useful for you, I know I found it useful. Feel free to ask me any questions about debt-free money (and how it could be implemented) after watching the video.

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