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Two of my favorite proponents of change, Thomas Friedman and David Korten, are leading advocates for a green revolution that will align our economy with human needs and the natural environment. Of course, I agree with this perspective. And although many of the critical problems we currently face will be resolved by setting in motion the changes they suggest, we cannot overlook the fact that their proposal leaves the most entrenched and damaging element of the story told by the gurus of economic witchcraft unquestioned: the framework remains within a world view that can be accurately described as dogmatic materialism. This framework wants us to believe on the one hand that a process of trial and error aimed at social re-engineering will eventually lead humanity to material prosperity and on the other hand that any mention of spirituality (or worse religion) in this process will only deviate the search and postpone the desired outcome.
Rejecting the consumer culture,"today's inheritor by default of materialism's gospel of human betterment", and attracted by the spiritual terminology and principles that tout harmony and unity as fundamental to human prosperity, the green revolution has attracted many of our leading minds to its cause. An increasing number of people turn their efforts towards it and set hopes on it as a panacea that will somehow bring both material and spiritual prosperity.
Material development is a fundamental aspect of true prosperity, and thus should be vigorously pursued. Dogmatic materialism, however, by defining this search in purely material terms and imposing a fear of sounding naive upon any challenger, has succeeded in alienating or at least confusing the great majority of the human population for whom religion is still the main guiding force in their lives.
As many traditional religions ever less clearly reflect the noble truths in their original writings, the frustration for those who want to pattern their lives by these traditions grows daily. On the one hand, little truth can be found in social and economic development as it is currently conceived because it does not allow people to incorporate spiritual truths, while at the same time the social and moral guidance people relentlessly search for in traditional faiths are mired in dogmas and, well, traditions and thus the little guidance offered has become increasingly irrelevant. Growing numbers of the world's people find themselves alone rowing in a sea of religious confusion.
Proponents of the green revolution point to this situation and rightly name it for what it is: a deviation in our search for prosperity, a veil that motivates some to search beyond religion for meaning and others to sink into the dogmas and traditions in hopes of finding some acceptance and tranquility.
Critical to this exploration, as explained in the following paragraph, is the fact that religion when properly conceived can offer and has done so throughout history, what a green revolution can never provide:
The current financial crisis is not what it seems. However, because it seems like, well just about any number of things, most of us don't feel that we have much choice but to trust that the people that got us into this mess in the first place will somehow get us out. Even more frustrating is that this is exactly the attitude that those people need for us to have in order for the show to continue as scripted.
These gurus of economic witchcraft feed us a story that goes something like this:
A doctoral degree in economics or any related field, from Yale or Princeton or some similar institution qualifies certain people to understand the intricate and extremely complex inner-workings of the economic and financial instruments that have evolved over approximately 250 years to their nearly perfect current status. The prevailing crisis has occurred because many of our vital institutions have had the poor fortune of being controlled by unscrupulous and selfish individuals. The common citizen should feel assured that our leaders have learned from this crisis and will make the necessary adjustments to the system so that consumer confidence grows, private investments become more financially stable and most importantly the Gross Domestic Product and the Dow Jones Industrial Average begin rising again, so that life can go back to normal.
I. Debt-Free Money
As I mentioned in an earlier post, there are aspects of our financial structure that are portrayed as having survived the ordeal of natural selection not unlike Darwin’s turtles on the Galapagos Islands, rendering them the gospel truth. However, as several elements of the current paradigm have been dethroned lately, we should take the opportunity afforded to dig deep into some others.
An element that we would be wise to pry into is the way we create money. Put in the simplest terms, “One key to Wall Street’s power and to the inherent instability of the financial system is the current practice of private banks creating money with a simple bookkeeping entry each time they make a loan. Because the bookkeeping entry creates only the principal, but not the interest, unless the economy grows fast enough to generate sufficient demand for loans to create the new money required to make the interest payments on the previous loans, debts go into default and the financial system and the economy collapse. The demand for repayment with interest of nearly every dollar in circulation virtually assures the economy will fail unless GDP and inequality are constantly growing.” (David Korten)
This growth imperative puts us in a bind by making us decide to either use natural resources unsustainably or default on our debt. So, the question arises, does money need to be issued as interest-earning debt? Common sense tells us that we can, and indeed must, use our natural resources sustainably, and that this principle seems much more important than servicing man-made debt. As we haven't been inventive or courageous enough to permit this common sense to see reality, we have given the power of issuing money over to private banks, which charge us for this service in the form of interest on every loan.
However, are banks really providing a service worth charging interest for? First, banks don’t really provide society with any notable service because they create money out of nothing while making it appear to be created by government. As Ellen Brown so clearly explains, “This devious scheme was revealed by Sir Josiah Stamp, director of the Bank of England and the second richest man in Britain in the 1920s. Speaking at the University of Texas in 1927, he dropped this bombshell:
The modern banking system manufactures money out of nothing. The process is perhaps the most astounding piece of sleight of hand that was ever invented. Banking was conceived in inequity and born in sin . . . . Bankers own the earth. Take it away from them but leave them the power to create money, and, with a flick of a pen, they will create enough money to buy it back again. . . . Take this great power away from them and all great fortunes like mine will disappear, for then this would be a better and happier world to live in. . . . But, if you want to continue to be the slaves of bankers and pay the cost of your own slavery, then let bankers continue to create money and control credit.
“Professor Henry C. K. Liu is an economist who graduated from Harvard and chaired a graduate department at UCLA before becoming an investment adviser for developing countries. He calls the current monetary scheme a 'cruel hoax.' When we wake up to that fact, he says, our entire economic world view will need to be reordered, "just as physics was subject to reordering when man's world view changed with the realization that the earth is not stationary nor is it the center of the universe." The hoax is that there is virtually no 'real' money in the system, only debts. Except for coins, which are issued by the government and make up only about one one-thousandth of the money supply, the entire U.S. money supply now consists of debt to private banks, for money they created with accounting entries on their books. It is all done by sleight of hand; and like a magician's trick, we have to see it many times before we realize what is going on. But when we do, it changes everything.”
Second, even though interest has come to be regarded as a natural and fair element of a healthy economy, it creates the growth imperative mentioned above. As David Korten puts it, “Privately issued debt-money … bears major responsibility for environmental destruction because it requires infinite growth, extreme inequality because it assures an upward flow of wealth from Main Street to Wall Street, and economic instability because issuing loans to fuel reckless speculation generates handsome short-term bank profits” at the expense of failing small businesses and home foreclosures. For this reason, Mr. Korten suggests that one of the most important elements of an agenda for a new economy is converting to debt-free money.
The story woven by the gurus of economic witchcraft suddenly becomes vulnerable. These are things we can all understand. Surely any product of evolution would not cause environmental destruction and widen the gulf between rich and poor as our current banking institutions do. Self-indulgent individuals at the helm of these institutions are the product and not the cause of a larger crisis in which private institutions are allowed to create money out of nothing by sleight of hand. Has measuring human prosperity and the health of our earth through the GDP and the Dow Jones index set us on a path towards anything resembling prosperity or health?
a screen that ships without a mouse, ships broken...
For many years money was generally issued by local banks at rates necessary to facilitate exchange. However, "…with problems caused by over-issuance and speculation, governments stepped in to regulate the issuing of money, creating the first central banks and issuing money … by printing it, selling government bonds to commercial banks and the public, [and] by borrowing it from the bank at interest. Thus, in order to ensure an expanding money supply, money is issued as interest-bearing debt."
As time passed, governments discovered that a particular difficulty with this system existed because "at any given moment in time, the total amount of debt in a conventional money system always exceeds the total amount of money available in the system. The money needed to pay the interest over these loans can only come from some other similar circuits, i.e. money issued by some other borrower. If that happens, the second borrower will not be able to earn back enough money to pay his debt. In order to prevent economic stagnation, the money supply must be continuously expanded: there is need of a perpetual borrower that can never go bankrupt despite the fact that he never pays his debt. Since the 1950s, governments have assumed this role. In order to stay above this debt, economic growth must exceed the growth of debt. However, in reality the global economy is not catching up with the exponential growth of interest bearing debt."
Scarcity is then a central component of the current economic system. This brings up several issues each of which merits attention. Scarcity of money has a double effect. First, it motivates people to work harder to earn money out of fear of falling into poverty. This is a key source of society’s deterioration as people are driven towards a profit motive and are frequently forced to work for unsatisfying and often socially and ecologically destructive jobs. Second, since money is put into circulation by creating principal, but not the interest owed on the principal, people and corporations must compete to obtain the scarce money to pay the interest. If the total money supply does not increase at least by the amount owed on interest, some necessarily go further into debt and even bankrupt. However, because interest is calculated to expand exponentially, it is at odds with the impossibility of producing and consuming goods or services at an exponentially growing rate.
Giving money the function of a store of value also motivates people to search for short-term profits at the expense of long-term growth, creating conflicting moral and economic incentives. "Consider as metaphor, for example, the life of a tree (or any other living resource). Because of interest, the net present value of any income far away in the future is negligible. So, it literally pays to cut down a tree and put the proceeds in a savings account instead of letting it grow for another decade or century. Similarly, the only types of trees worth planting commercially are the fastest-growing varieties such as pine. (Nobody plants redwoods for commercial reasons.) So even when we plant trees, we are systematically losing biodiversity."
As we have recently been reminded, another detrimental use of money is speculation. Over the last five or six decades money increasingly developed into a tool for speculative profit until it became the dominant use for money. "Today more than 95% of all currency transactions are motivated by speculation; less than 5% are for trades of goods and services." Able to generate spectacular profits within increasingly short periods of time, money acquired a new purpose: to merely reproduce itself. Investors search for schemes that will offer the largest profits within the shortest amount of time, essentially blind to real human needs and ecological concerns.