Financial Crisis - a scenario for change
by Michela Collett
(Cape Town)
10/07/08
The World Financial Crises.... Part 1
Could this be the time for a change........?
Essay by Michela Collett
comments to collett@tiscali.co.za
This essay will introduce terms which need further description and formulation so I ask the reader to take them on face value for the sake of brevity and use their imaginations to put them in the scenario I am developing. Once you have read this brief scenario I would love to have your 'shoot from the hip' heart felt response. In this way it may just build into a coherent argument worthy of presentation. So in the spirit of starting the wheel turning, read on .... we begin with the end in mind.
This plan involves:
banning the act of usury and everyone becoming neither a lender nor a borrower but a partner in exchange with shared risk.
declaring the Earth a natural person who owns all its natural resources and wishes to maintain its ecological balance in order to host life in perpetuity.
establishing a council of kings who are appointed by their ethnic, religious or social communities irrespective of national boundaries or borders whose sole task is to protect their people.
creating separate independent judiciary who also hold jurisdiction over the military.
maintain the national borders purely for the purpose of good governance of the tax base which supplies the basic needs of society and is watch dogged by a democratically elected group of people.
maintain the marketplaces of the world such as stock exchanges and banks and other mechanisms of trade as they are with the exception of being able to practice usury. All currency used for trade and is in play and its value is measured by how fast it moves from hand to hand.
understanding that the emphasis of wealth creation will be on your ability to find things other people need and you will assess the cost of your product sustain ably and your market demand will be real exchange of another person's productive ability.
understanding that we are no longer a world filled with maniacal magicians amusing us with their alchemical marvels and hypnotizing us into believing that we cant do without them no matter the price to future generations, with a bunch of patriarchal politicians manipulating various ways and means for us to have these wonderful inventions so we keep them at the head of the table. A mouthful and doesn't that say it all – we are a world who have a better level of education and we have had a guts full of this insanity. So thanks Dad for the education but I am not joining the family business.
What is the Problem?
Inflated demand as a result of cheap money
Result high prices
What happened to what they bought with what they borrowed?
It was consumed - food entertainment
It exists as a depreciating asset – cars and household goods
It exists as an appreciating asset – precious metals and gems, art, collectibles
It exists in the form of improved or unimproved property with questionable value
It exists in the form of securities on the exchanges of the world
All of the above at inflated the prices
Institutions have taken money saved by individuals in retirement and provident funds and bought stocks with inflated values
They become the real casualties of the whole situation
Their real hard earned money went into an unreal world
However it could just lead to mass deflation with everyone in the same boat
Currencies, which have irresponsible Central Banks, flooding their markets with excess money by making it cheap to access.
They cause currencies linked to theirs to suffer as their currencies appear falsely weak as much of the cheaply acquired currency with low interest offered is used to trade in the other currencies where a higher rate of interest is offered to make them more attractive driving their values to levels dictated by interest.
Neither a lender or a borrower be – is this the real problem – surely we need to be partners in risk not borrowers beholden to lenders at an interest rate which fluctuates to the lenders advantage.
Money needs to be a means of exchange - Not a means of wealth acquisition – real wealth lies in your ability to exchange or trade.
Solutions:
By eliminating practices of usury we close the gap between different peoples level of productivity versus consumption. You only buy what you can afford hence you need to be productive before you can consume. If money is needed to develop something it is obtained by shareholders who believe in the project. There are existing mechanisms for this and none would be eliminated. So eliminate usury practices - all money used only to exchange with risk shared by investors.
The development of different currency groups would create levels of exchange between financial communities. There would not only be the trading currencies we know today, but three currency groups.
The first currency, an international one, would be formed by the central banks repossessing all the loaned money and setting up one bank to administer it. This would mean that if you had a loan you could choose to transfer it to the central bank and in so doing be liable only for the capital amount transferred. This in effect is a unilateral cancellation of debt by the banks but not a cancellation of the repayment by the debtor. The debtor however is in a better situation as they are relieved of any interest which they may have had to pay.
In effect the Earth would hold the book of debt which would slowly be redeemed giving her some working money and she would take that money into the market place just like everyone else. A further source of revenue would come from being the custodian of the Earths Resources. It would be granted the right to charge for:-
the right to extract finite resources from Earth. This income would be used to fund the replacement of the lost resource for other resources in time to come.
The right to access land for development – human habitation, food production, infrastructural use eg roads dams railways
the right to access renewable resources at a price which maintains their sustainability by some mechanism.
This would create an industry around maintaining its sustainability. Every time the natural state of the earth is disturbed the price of this disturbance is measured against the cost to return it back to its natural state or compensate the loss of this state by the enhancement of another state eg. Money for urban development is used to enhance the property of soil for food production. The success of its endeavors would make its resources desirable and therefore affect the value of its currency. By placing the earth's resources in the marketplace under contract would create incentive and opportunity for ingenious development of these resources.
The genius in this plan is the money created by these central banks is still in circulation and is technically changed from an inflation producing mechanism to an incentive producing mechanism challenging the great minds of today who are driven largely by the acknowledgment they get from their work. They will be highly motivated to succeed so they can go on with their research.
Should the party still default in payment then the assets are secured by the bank for use at a nominal rate encouraging exchange, poverty relief and productivity.
The debt now becomes the currency for the exchange of assets/resources with the earth. This currency will be actively traded. Free market principles will apply to establishing its value and it will cause a natural leveling of the playing fields for the poor who have no means to be productive because they lack capital. Those who have acquired capital through debt will now be in a position to close the gap between their borrowings and their productivity.
The creation of this Earth/Inhabitant market place will create an entire industry of its own and its success will be reflected in its currency value related to the national and local currencies. All being traded based on the amount of trade able profit they generate in a specific time period as opposed to the amount of value they accumulate in Capital assets.
The existing national currencies would be maintained for the purposes of trade and tax and would not be changed in any way. There would be a probable alteration in terms of the values they trade at however the money will not disappear just change location driven by free trade activity. The current democratic structures would continue to exist - now with the watchdog of the Earth's custodian kings balancing the scales of greed and avarice. The nature of money will change from being hoarded to accrue interest to being moved from hand to hand creating added value each time.
Local currencies governing trade for the purposes of promoting local community productivity and exchange could be introduced in areas where there is a large number of services to exchange. Local currencies work best in a mixed economy where the service sector of the transaction can be negotiated separate to the consumable sector. You pay the hairdresser in local currency for the haircut and in national currency for the bottle of shampoo you buy.
Part two to be continued - Who are the Kings?
