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German text copied in September 1999 from the online-archive of the INWO. Thanks! Translated into english in winter/spring 2004. (Not yet completed.) Jrgen Probst
Preliminary note
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There are many aberrations. We only have to turn on the TV and are already besieged with them. Why should there exist any connection between many of the known aberrations and the fact that money is normally lent out against interest? It appears already at a first comparison that the financial and interest-caused factors "outrun" the remainder of the economy, that they posess seemingly a dynamics on their own which is not or only very limitedly bound on outer proportions. The financial sector disconnects itself always further and finally takes off. But on an a bit closer look it also shows that this process has indeed effects into the other direction. The exploding monetary capitals, debts and burdens of interest do not pass the remaining society without a trace, but leave traces behind, which normally - one is inclined to say: nearly always - are underestimated. A small, at first glance inconspicuous, construction error of our monetary system is responsible for this self-dynamics, and the errors consequences merely become obvious little by little. The sense of this report consists in the endeavour to unmask this construction error and to depict his most important effects. Last but not least approaches to solve the issue shall be presented, which act beyond many concrete problems, and which could be carried out relatively easy. This may seem very bold within the limits of this small booklet, but one must pay attention to the fact, that this is solely something like a matter of a summary which can not replace literature. Most of the thoughts stated here were taken from various sources, compiled and shortened to the essence. Herewith I want to give the reader a succinct synopsis and, simultaneously, to initiate further absorption. Naturally, a claim on completeness is excluded; also the many quotations shall not arouse the impression that the respective authors share the same opinion in all points, since many aspects can be treated indeed controversial. So let us regard this booklet as a little "journey" through an important, albeit faded out, topic, which unfortunately becomes more urgent day by day.
1 An ignored problem
The sums which are linked to the interest calculation of capitals are no peanuts. Hence it will be sensible to start with some plain facts to get an overview about the orders of magnitude and their relevance. So in 1995 the sum of monetary capitals in the FRG added up to 7703 billion DM1 & 200 which gained an interest of 365 billion DM2. On the other hand they were opposed by 7694 billion DM debts, which divided theirself to about two thirds on the commerce and to one short third on the state. The consumer credits only added up to 5% of the total sum. The expenses on interest which were to be generated for the entire debts totalled to 499 billion DM. In 1995, these burdens of interest were from the amounts view a bit more than the whole Federal Budget (493 billion3) or almost twice as much like all in the FRG in the same time span paid health insurance fees including employers contribution201 (256 billion DM4), or even 35 times (!) as much as the full amount of the assessed income tax (14 billion DM5) for 1995. These burdens of interest augment itself all the time; since 1990, the increase alone added up to 164 billion DM, whereas however this increase normally also increases all the time6. The interests booked to the savings account of the one or other person originate in the strict sense just as little from the bank like the credit for the freehold flat. The commercial banks should be understood rather like a kind
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of intermediation agency which search new debtors for the deposits of their creditors and, at the same time, take the risks for the creditors. The risks will be charged to the debitors as interest surcharge. The bank keeps from the money only a cash reserve and from the interests only the so-called bank margin, that is the difference between debt- and balance-interests. Facing these phenomenal financial currents one should guess that this would cast a spell to whole hordes of economy-scientists who build avidly analyses and statistics to throw light on the causes of this weird trend. Unfortunately that is not the case. The reasons for fading out this issue remain largely in the dark and can only induce to speculations. One reason could be e.g. in the fact that interests are "only" a matter of a redistribution which has no (direct) influence on the gross national product (GNP) or the national income. There is even repeatedly argued by economists that the above cited dimensions must be wholly farcical, because they can not be found in the national accounting (NACC)7. Sure enough they are not allowed to be found there since the NACC only itemises the GNP and the interests are computed away at creation of the NACC8. This report shall not be content with computing away these factors but enlight some of the correlations. But before some terms have to be resolved to prevent later misunderstandings.
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unfortunately there is a "little" problem. The above description acts on the implied assumption that the issued money in fact circulates. If it does not do so, it behaves to the economy as if it would not exist. For a better overview it would be good at this place to change the perspective and observe the economic area "from above". There below are now all the little economic subjects who deliver goods and services to other economic subjects and receive exchange money in return. The direction of transmission is always reversely for both. It just swarms and teems with exchanging economic subjects. The exchange money circulates. A part of the exchange money is saved by some people and deposed at a bank from which it reappears on the other side as credit. It leaves at each pass a trace behind in form of a balance at the entry and a debt on the exit. On a redemption the operation is reversed. A prices' level emerges which is accommodated to the amount of circulating exchange money. The amount of exchange money is limited as a matter of principle, and there is a compensating pump (the Federal Bank) which can add or drain a bit by a valve. Now some economic subjects get the idea that they also - for reasons with which will be dealed later - can keep their exchange money with them, to carry it liquid. Little "heaplets" form there. The circulating amount decreases in the degree how parts of the exchange money are immobilised and blocked. A deflation threatens. The compensating pump has simply the problem that it does not know how big the circulating amount of exchange money is at all, and, facing the threatening deflation, turns up its valve always rather a bit more than in fact needed. Thus it creates a sneaking inflation. Nevertheless it may happen that the retention of the exchange money increases very rapidly under certain conditions and the compensation strategy of the pump is overstrained. Then the money becomes short, although there exists possibly as much exchange money (including bank savings) as never before. The swarming receives a slowdown and the pump turns up its valve in order to remedy the shortcoming. Afterwards, the retained assets are brought in part to circulation again and provide a drive to the inflation. The swarming fortifies itself again and swings into a higher price level. Admittedly, the functions of the Federal Bank are not really comparable with the ones of a pump because it reacts within certain limits to the demand of the economy. Within the perspective above the economic subjects are able too to "ingest". And also otherwise much is roughly simplified, anyhow this image seems to be suited to regard some correlations simultaneously.
3 Schizophrenic money
To bring it to the spot: Our conventional money shall fulfill multiple functions resp. tasks simultaneously. The here especially concerned tasks consist in the fact that it shall serve as a) medium of exchange b) object of capital and furthermore as prices' standard. Of course, it is very important too as prices' standard, but here most notably the first two functions will be examined since they cause an "unresolvable" contradiction, a dilemma. A medium of exchange is characterised in that way that it will be passed on; but an object of capital right in that way that it will not be passed on. To use money as medium of exchange means consequently to dismiss it as object of capital, whereas it as object of capital can not be used at the same time as medium of exchange (neither by oneself nor by all those which would have received it subsequently if one had used it).
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A pure medium of exchange would have to be a public utility at everyones disposal who takes part on exchange processes. An object of capital however is a downright private property which excludes all other participants from its use. This dilemma is not secondary. It shall be revealed in about the first half of this booklet why not. The sometimes heard opinion that money would be only an insignificant "veil" over the real economy is here denied. Money in its function of exchange medium shall be understood rather as imperative requirement of each society based on division of labour: without medium of exchange no exchange, no division of labour.203 Once more it shall be stressed that exchange money means only liquid assets in the above defined sense. Though other savings are also objects of capital they can not be used as medium of exchange anyway and do not fall into this issue.
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insurance against uncertainty, consequently the insurance of the uninsurable, which can not be calculated anymore as risk.13
5 The liquidity-premium
The term of liquidity has been used already some times and shall be specified too: "Liquidity shall be defined here as the degree of the direct or indirect availability of arbitrary goods" 14. How nice that one can fetch that much from simple definitions at this topic. The "degree" of availability allows to extend with the liquidity the previous definition of money by the temporal dimension. Hard cash is current, ultimate liquidity. To carry it liquidely has as result to be able to dispose about it without any effort and simultaneously to block it by 100% for other economic subjects. Demand funds are still high-liquide, but not anymore that liquide like hard cash. The commercial banks can on their part lend out the deposits, but are very constrained in the usage. On a short-term time deposit the liquidity has been relinquished a bit further, the cash reserves to be held in the bank are still noticeable. And so through all the remain of it, as long-termlier the liquidity will be relinquished, the less it will be blocked for others.15. Now it is possible to return to the initial problem, the interests. Keynes has provided the tool to establish the correlation of liquidity-premium (wildcard advantage) and interest. The thread turns out, spoken roughly, so16: In a free market various objects of capital are at the choice of the economic subjects on which they can divide their capital, as e.g. money, short-term investments, bonds, shares, factories, residential houses, land, etc. It is possible to make subtitutions of the objects of capital via the market. The total advantages (intrinsic interest rates) accruing the economic subjects from the respective objects of capital tend to become equally high at all objects17! As soon as they are not equally high regroupings occur which restore again the old homogeneity. If e.g. the property of office buildings offers greater advantages than the one of certain bonds, in the long term as many investors will sell their bonds and invest the revenues into office buildings until the price of the bonds sunk and the one for office buildings raised accordingly (It would be a different thing if new office buildings would be about to be constructed: The creation of the new buildings would come to a hold when the yields of them would have dropped to the level of the yields of the bonds). A similar sequence arises also at the compensation of interest differences between comparable investments. The intrinsic interest of an object of capital equals his revenues minus its costs and again plus its liquiditypremium. The following image arises for some showcase objects18: Object of capital Hard cash Demand funds Time deposits Long-term Revenue resp. interest 0% 2% 4% 6% Costs 0% 0% 0% 0% Liq.-premium (Wildcard) 6% 4% 2% 0% Intrinsic interest (Total advantage) 6% 6% 6% 6%
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Risk surcharges, brokerages and the like were disregarded at this table. The percentage values correspond always with the capital expenditure. They are thought only for clarification of the order of magnitude but are not exact.204 Concrete differences in the rating of the respective objects of capital exist of course for the single person, according to strategy of investment, objective target or risk estimation. But it remains also sensible for the single person to heighten the more advantageous positions in charge of the less advantageous ones ongoingly that much until the respective total advantages have been adjusted. The liquidity-premium resp. the wildcard advantage is to be understood as such advantage which adheres the respective object by the given legal framework (currency arrangement, laws), by its being-that-way-it-just-is resp. also by established human needs. For this reason the apartment in the table has also a minor liquiditypremium since residing is an absolute basic necessity. One can let apartments even when in crisis times, or one can live within on oneself when appropriate. Living space is a safe investment of capital! This effect occurs even more intense on property of land since usage of land is prerequisite for each human activity. Nevertheless it can not become accreted and thus remains always short; it can not even become destroyed. Land is the traditional and safest kind of investment of capital. In return the revenue (the rent) is less than on other objects of capital. In this respect the property of land is "liquidely"19 even if this is contrary to other classifications. If one keeps in mind that there occur perpetual regroupings according to the table which compensate possible imbalances one sees instantly that the liquidity-premium of the most liquide object establishes the minimum for all other total advantages20. It will be determined by this object which revenues all those objects of capital have to yield at least which are not anymore liquidely on their own. Due to that the interest remains always positively under the given conditions since the liquidity-premium of money sets the standard below which the interest can not sink. If the interest sinks to this limit, the so-called preference of liquidity rises. Long-term money investments will become redeployed to ever short-term ones, demand funds will become inflated and even the hard cash inventory rises. Speculations in shares and currencies increase. It becomes ever more rentable to realise the advantages of liquidity instead to collect too low interests. The amount of exchange money will increasingly become blocked and the offer of liquidity decreases. The drop of interests will be stopped by this and capsizes at some time into a rise. Thus the level of the interest resulting out of the capital market is also not a "price for the money" or the with it connected purchasing power since that buying power will be indeed restored again later. The interest is the refund for the advantages of liquidity per time unit. Instead of speaking about "Lending out the money" it would be more accurate to talk of "Lease of temporal liquidity"21.
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It was said above that the interest can not fall below a lowest limit. This inconspicuous fact has far-reaching consequences. On his part the interest sets, that is to say, the standard below which the yields of the capital in kind can not drop. If they eventually do once in a short period, the capital in kind is not profitable anymore, and an economic crisis happens during which the most unprofitable capital in kind will be decimated. A shortage of the present capital in kind results. Companies go bankrupt or close the most unremunerative locations, additional and also substitutional investments will be left undone since they would now return less yield than the interest which one gains on a money investment.205 After all, the capital in kind is nothing else for an investor than an interestbearing investment, since the money will be given away in the same manner. It has to compare itself by the interest. This mechanism guarantees the remaining capital in kind again an "adequate" yield. "So the crisis creates the prerequisites for the next boom, since the due the shortage of the capital in kind again risen interest of the capital in kind channels the money again into investments of capital in kind." 23. In the majority of cases only the weakest economic areas (Companies with poor yield or such with low equity-to-assets ratio) are concretely affected during the crisis, so that it often appears that the individual reason would result from wrong decisions and incompetence. Such fine words like "Market adjustment" or "Downsizing" serve as euphemisms for this event. Accompanying, an "adjustment" or "downsizing" also occurs on the employment. It would be a bit too simple wanting to assure that the conventional interest-bearing money introduces the reason for yields of capital by all means. It is "only" the cause for the unability of the yields to drop below a certain limit, at least not overall-economically and long-termly. Of course, the discussion about the "yield by all means" can not become treated extensively but some comments shall be still mentioned. The wildcard advantage of the money is a power agent allowing to implement an interest. There are truly many power agents. Also the property of means of production (capital in kind) is a power agent in an economy of scarcity. The power accrues out of the covetedness of the produced goods; if they are not coveted "the capitalist" can - rakishly said - nail himself the means of production onto his knee. But economy of scarcity means nothing else than shortage. Hence Marx was not entirely wrong to search the reason for the "surplus" during an objectively present shortage in the production. Undoubtly a surplus can also only be produced in the production (thus by labour). The question is rather whereby it will be enforced permanently! It has been shown above that the money resp. the liquidity available to the economy can be shortened "artificially" (preference of liquidity). The shortage does not originate at all a conspiracy and also not the evil will of "the capitalists" but is rational for each money owner who wants to use the offered advantages. The shortage of money resp. liquidity transmits itself into the real economy since a shortage of liquidity leads inevitably to a shortage of capital in kind. So the liquidity-premium of the money sets the limit beyond which the capital in kind can not become accreted. Thereby an interest-based economy preserves in the long term also the yields of the (remaining) capital in kind since the shortage can never become eliminated. The capital is under the given conditions always the shortest production agent no matter how much of it already exists. It is rather the most urgent task of state and society to take care, by demand stimulation, "need-creation",
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national thriftless projects, export augmentation etc., that this also remains that way, because otherwise we get a crisis which restores the shortage coercively. In contrast an (ideal, not interest-forged) economy acts ongoingly as eliminator of yield and interest. It is both a theoretical and practical commonplace that yields drop with increasing accumulation of capital. The descent of the yields occurs by the competition: The more concurrents exist, the more products appear on the market, the further the demand becomes fulfilled, the more difficult it will become to keep some yield left. Our "capitalistic economy" is a hybrid24 whose one side pushes to a compensation and whose other side enforces an enduring imbalance. The up to now preferred "solution" of this dilemma is the economic growth at any cost. This topic will be dealt with in more detail later.
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of their possibilities unused, and that for the sake of the relative shortage, for the sake of the yield which can not tolerate plentifulness, and finally for the sake of the interest.
8 Noiseless redistribution
The question arises who stands Sam. On the direct way that are at first the debtors, thus the economy and the state. "The economy" means concretely the indebted enterprises. Although in fact the income of the entrepreneurs drop during a phase of high interests and only increase afterwards28; the transfer of interest becomes quasi "elastic". But in the long term the enterprises have no other possibility than to pass all the costs, to which also the interests belong, on the prices. The interest gain of the equity capital will become ensured by the mechanism decribed above (provided that the enterprise does not become victim of a capital shortage). With the state the passing becomes even clearer, since he meets its expenses by the biggest part from taxes. So the consuments and tax payers pay the interests according their spendings and taxes. However, interest incomes result from the size of the monetary capital and, additionally, often become subject to "tax avoidance" on remunerative amounts. Hence it seems legitimately for a rough calculation of the total burden to reference the burdens of interest to the national income29 and to assign the interest gains according the monetary capitals. In 1995, the national income added-up to 2615 billion DM30, the burdens on interest to 499 billion DM, whereas however one has to pay attention that the level of the interest rate sets also the standard for the yield of the capital in kind. Even if it is assumed that the debt-free, economically used capital in kind (ca. 4400 billion DM) would realise still a profit also without interests and there are only assessed 4% (= 176 billion DM) as "real" interest gain of equity capital, a total charge of 499 + 176 = 675 billion DM results. That are more than 25% of the national income which were smartly, noiseless and effectively diverged in 1995 without anyone being upset about it! One might dispute about several percentage points, but the order of magnitude is not made of thin air. There would exist still several different modes for evaluation yielding in part even higher values, but for which it is to be referred to literature31. The personal burden of interest becomes quickly calculated in approximation when one multiplies the own expenses per year inclusively taxes by 0.2532; interest gains and interest-related incomes from capital in kind have to be deducted from it. The probability speaks for the fact that the addicted reader belongs to the 80-85% of the population whose face falls knowing this evaluation. The burden of interest is very different in specific spendings and depends in the essence on the intensity of the capital expenditure. At the rent the burden amounts up to 80%, at the haircutter service it will become rather small. Concerning the whole society the "phenomenon" results that the monetary capital is distributed very unequally. In the FRG the wealthier half of all households owns 96% of the monetary capital whereas the poorer half accounts for only 4%33. Creutz has undertaken a netting out of the burden and gain of interest on the basis of ten groups of households, and has shown that the hidden interest payments of the poorer 80% of the population accumulate at the richest 10%. For the remaining 10% the computation is approximately balanced34. "This explains exemplarily simple a mechanism - possibly the most important - which lets become the rich always richer and the poor always poorer. ... With the interest in our system a redistribution of
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money is connected which is not based upon effort but finally thereon that someone can hinder the freemarket economy, that means the exchange of goods and services, and can enforce an interest for the abandonment of this hindrance." 35 From a functional perspective one could also say: "The chitchat about the capitalistic "Performance society" emerges consequently as ideology if it becomes visible that the functional distribution of the national income does not result by the performance but by the shortage criterion." 36
9 Exponential growth
Of course, the interest has to be paid also on the parts of balances formerly created by interest gains. One names that as the compound interest effect. Sure enough it only comes into effect when the interest revenues do not become used otherwise, e.g. for consumption. However we will still see that the latter is the case increasingly more rare. Also investments carried out directly by the recipient of the interests do not change anything at the principle provided they are rentable. The compound interest effect causes an exponential accretion of the respective balances. That means, expressed more clearly, that the time in which the balance doubles is constant (provided there is a constant interest rate). For example, the doubling takes about 7.2 years at a rate of 10%. Maybe that does not sound exceedingly exciting but the principle is that of an explosion. A striking example for that is a nuclear bomb: By the emission which is set free at the fission of an atom the fission of two more atoms will be caused, then four, then eight, then 16, 32, 64... How many might it be after 50 cycles of disintegration? It are about 5.629.499.500.000.000. Another example is the story of the inventor of the chess game: "The enthusiastic king grants the clever inventor twice as much grains (wheat grains, the author) for each chess field as on the field before: On the first field one grain, on the second field two grains, on the third 4, then 8, 16 ..., at some time 240 , that are already whole storehouses, 241 , 242 , always twice as much as before. Eventually between 245 and 247 , the king capitulates without means, although he promised indeed the supply and doubling of grains for all 64 fields = 263 (totalling to 264 -1). Of course, the king is obliged by mathematics and by law, but due some other reasons he is not able to comply with this obligation: From some certain amount, it is simply impossible to double once again." 37 The king would have to ante up 440 of todays world cereal harvests (which had to consist of only wheat) for that.38 It would not be admissible to transfer such anecdotes implicitly onto our currency system. Let us rather look at some concrete counts. For the whole monetary capitals and debts of the FRG the following trend appears39: Year Monetary capital Debts (in billion DM) 1950 1960 1970
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59 337 926
66 303 852
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Of course, one can not deduce an exponential function in the strict mathematical sense, but the trend is obvious: The increase accelerates itself. Interest incomes resulting from the monetary capital surpass the whole savings accumulation since long (1995: 276 billion DM40), whereby the savings are tendentially accruing always less out of the earned income. By that the consumption is also less since the interest incomes become "saved" just by those who could lend out their surplus before. The result: The monetary capitals take off. An obvious counterargument says that this would not be a problem at all if the indebtedness would not increase too. Ultimately, the debtors should be to blame for all that? Sixty-four dollar question: What happens if, at the currently (1995) "circulating" cash amount in a height of 238 billion DM41 (+579 billion DM demand funds), the interest incomes of a year equalling 365 billion DM do not become feed back into the economy and also not become spent for comsumption? The posessors of the monetary capitals would have blocked in addition nearly the half of the total exchange money amount (with hard cash alone that deal could not become carried out at all)42. They would be extremely liquide but the economy would crash. Of course, that will not happen because before that the process described in chapter 6 starts and shortens the capital in kind that much (and creates that many liquidity bottlenecks) that someone will be found who takes the offered money for an "appropriate" interest payment and as the case may be also invests. The growing monetary capitals do not only enable a further indebtedness, they enforce it! At this place many a person will shake its head and say himself that this is completely farcical because that can not work in the long term. You got it! Just that shall have been shown. That mechanism has also never worked stable in the past43. Why it should do so of all things and against all logic in the future? The explosion taking place here occurs just not in fractions of a second but in decades.
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before the cake will be shared among the working ones increases permanently. There are in principle three directions which the development can take: a) Impoverishment (of parts) of the population (the remainder of the cake becomes smaller) b) Economic growth (the cake becomes bigger altogether) c) Inflation (the cake becomes inflated) The debt rescheduling can be regarded as a fourth possibility for a very limited time, that is the payment of the old credits by new debts. But this possibility reaches very fast its limits due the diminishing creditworthiness of the debtor and hence is no alternative for the economy. Only the state in its nature as exceptional credit-worthy debtor can make use of debt rescheduling for some time, before also it becomes insolvent. The debt rescheduling and inflation cease to apply at the moment (one must say: until they become unavoidably45) as possibility to be taken seriously. The redistribution at the expense of the working ones, that is the absolute impoverishment, entails heavy social tensions, so only the economic growth remains. In this respect, the interest-based economy imposes an exigence of permanent growth, a "growth enforcement", whereas however this enforcement is to be understood as social and political enforcement. Growth is necessary to avoid or at least attenuate crises and to delay the social collapse. So also the demand of many economic scientists and politicians becomes understandable who mean that an everlasting economic growth of 3% would be categorically needed to avoid otherwise unevitable crises.206 Because the reason of this demand is hardly ever explained, the ecologic movement sees itself confronted by a killing argument which unfortunately hits the bull's-eye as long as the established relationships do not become questioned.46 Indeed, the demanded economic growth would be likewise exponential growth as also the growth of the monetary capitals if it could take place at all. In the long term, it would have to lead to wholly farcical orders of magnitude. Here the "sustainers of our society" in politics and science reveal a total lack of simple mathematical basics. One could also phrase it handier: "It is the categorical declaration of bankruptcy of the entire official national economy that it can not or does not want to recognise the growth as problem but declares it as prerequisite of prosperity." 47 A growing economy causes a growing resource consumption. An exponential growing economy would in the long term negate all endeavours of retrenchment and environmental protection. Well, there is the often voiced demand of a so-called "qualitative" growth, whereupon it remains in the dark how this shall look exactly. Furthermore, the gross national product is an out-and-out quantitative term, and only an economic growth which itself condenses in Euro and Cent can enable to defuse the above described distribution difficulty at times. Thus the growth of the service sector is understood by the "quantitative" growth. "Indeed, the portion of this sector on the GNP has risen considerably. This is however not a solution of the dilemma since the service sector can only grow when it serves a growing production sector, just in order that this one can grow still better. Moreover, one can notice also in the service sector a forever increasing capital expenditure and resource consumption." 48 How one may also turn it, as long as the growth does not become recognised as problem the measures on
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environmental protection resp. repair, and the unsuccessful search of the system-compliant sustainability remains a Sisyphean task which can not stuff the old holes as fast as, on other places, new ones rip open.
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by the liquidity premium of the money - and with that also the signal of shortage and a positive "social discount rate". Thus life is not only temporarily at cost of future generations but permanently. This sacrifice of future generation does not still even make sense since the shortage can not become eliminated in the capitalism." 50
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anew).
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With each recession a destruction of capital in kind (by insolvencies, liquidation of companies, omission of investments) and jobs is accompagnied. The yields raise again a bit, investments become rentable again. However, the employment remains on the route which becomes reduced at every recession and becomes substituted by capital-intensive methods of production at the next boom. So the recessions are not to be regarded as a phenomenon of decay of the capitalism but - in the opposite - as a stabiliser of the required (relative) shortage without which the interests and yields would not be permanently possible. The task to compensate the increasing social disparity by "back-distribution" behooves to the social system, but also again at cost of the remaining working ones59. The distribution runs from below to ultimately below to arrange the system-inherent concentration to above reasonably tolerable. Another flashy phenomenon settled in the financial sector is the speculation with shares and foreign currencies60. ... The emperor is naked, and everyone can see it! One merely must not look the other way.
Annotations
1 For monetary capitals and
debts cp. Deutsche Bundesbank, Finanzierungsrechnung 1990 bis 1996, p. 40. All sums were rounded to whole billion DM. 2 Regarding interest returns and expenses cp. Deutsche Bundesbank, Monatsbericht August 1997, p. 54. ... Translators annotations
200 1
DM = 0.51 Euro. 1 billion = 109. 201 The health insurance in the FRG is enforced by law, and paid half from the employees official wage and, additionally, half by the employer. 202 See the quantity equation, or e.g. the example of the french Assignates where a hyperinflation due overemission occurred. Cp. Karl Walker: Das Geld in der Geschichte, chapter about Die Assignaten. 203 Of course there is a minor direct exchange possible, but the transaction costs in regard to time and search of matching offers are too high to establish direct exchange as real alternative in all respects. 204 The level of the liquidity-premium for cash determining the total advantage of all other objects seems to be dependend on the overall economic circumstances. Other sources state a limit of down to 2% for this liquiditypremium. But whatever level it may be, it is not negligible, and will not drop to zero. 205 The reader shall be reminded on the possibility of keeping the money liquidely, excluding many risks and thus equalling a premium, as mentioned shortly before. 206 From a cybernetics point of view, interest can be regarded as positive feedback in the economic system. Then the economic growth is the negative feedback which is tried to become implemented by governmental politics to get the system stable. 207 For a better explanation cp. Bernard Lietaer: Das Geld der Zukunft, Pneck 2002, pg. 368-376. 2xx I want to point the reader on two historical examples of demurrage money having become known after
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writing of this report. The first is of ancient egypt where a demurrage money based on grain ostraca was in use from about 1900 resp. 1600 BC until roman invasion in about 200 BC. The second is of the medieval times in central europe from about 1075 until about 1400, where special coins ("Bracteats") were demonetised on a regular basis ranging from 4 times a year until every 7 years and exchanged into new ones with a discharge from 15-40%. This was a main reason for construction of cathedrals which came to a long halt after that time. In both cases a demurrage and a permanent money coexisted, and after abandonment of the demurrage money the common economic prosperity declined. Cp. Bernard Lietaer, Mysterium Geld, Mnchen 2000, pg. 146-246.
Translators notes
The translator wants to point at Bernard Lietaers proposals of regional money which is more likely to realise. However, this paper describes the problems very accurately. The translator transfers all rights on this translation to the INWO.
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