money, the commons, and growth oct. 24, 2003 gary flomenhoft gund institute
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Money, the Commons, and Growth
Oct. 24, 2003
Gary Flomenhoft
Gund Institute
“INVISIBLE BOOT”
“INVISIBLE BOOT”
system
“MONEY SYSTEM AS A PURE PUBLIC GOOD”
Rival}
Non-rival}
Excludable Non-Excludable
Market Good: land, timber, fish once captured, farmed fish, waste absorption capacity?
Potential market goodbut inefficient: patented information,pond
Pure Public Good:climate stability, ozone layer, clean air/water/land, Biodiversity, information, habitat, life support functions, etc.
Open Access Regime:Oceanic fisheries, timberetc. from unprotected forests, waste absorption capacity, roads(congestible)
VALUE OF COMMON ASSETS
21 years of dividends2002 $1,540.762001 $1,850.282000 $1,963.861999 $1,769.841998 $1,540.881997 $1,296.541996 $1,130.681995 $990.301994 $983.901993 $949.461992 $915.841991 $931.341990 $952.631989 $873.161988 $826.931987 $708.191986 $556.261985 $404.001984 $331.291983 $386.151982 $1,000.00
Alaska Model: Alaska Permanent Fund
(Share of the commonwealth)
DECLINE OF THE COMMONS due to “market fundamentalism”
A Brief History of Exchange
C= commodity M= money
C-C’ = barterC-M-C’ = money as a medium of exchangeM-C-M’ = mercantilism, money as a store of value and end in itselfM-M’ = speculation, money as a way to redistribute real wealth
A Brief History of Exchange
Speculative exchange in the global economyBuying and selling of goods and services is about
$30 trillion per year globally
Buying and selling of paper is about 1.5-2 trillion per day, or 500-700 trillion per year.
95% speculation in paper! M-M’
M-M’ = speculation, money as a way to redistribute real wealth
A Brief History of Exchange
“Speculators may do no harm as bubbles on a steady stream of enterprise. But the position is serious when enterprise becomes the bubble on a whirlpool of speculation. When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done.”
-John Maynard Keynes
WHAT IS MONEY? IOU to avoid barter
WHO CREATES MONEY? (SEIGNORAGE)
GOVT: $600 BILLION
TOTAL: $8.6 TRILLION
600/8600 = 7% BY GOVT
100-7 = 93% BY BANKS!
HOW DO BANKS CREATE MONEY?
HOW DO BANKS CREATE MONEY?
INTEREST!
Magic of money creation
FRACTIONAL RESERVE ~3-5%
FED RESERVE BANKPRIVATE LOCAL BANK
$1000 DEPOSIT
$1000
(5% OF $20,000
“on reserve”)
LOANS
$20,000
$20,000
ASSETS
INTEREST
PLUS INTEREST!
Best scam going: privatization of huge public asset
How the Federal reserve system creates a private banking monopoly cartel!
3 PROBLEMS WITH BANK CREATION OF MONEY (GRECO)
1. Artificial scarcity- debt grows with passage of time. Not all debtors can pay. Never enough of it to serve the purposes for which it is created
2. Misallocated at the source- goes not to those who are most in need or who will use it most effectively, but to political power centers, well-connected insiders, and those already wealthy
3. Systematically pumps wealth from poor and middle class to the wealthy.
1. Debt
2. misallocation
3. Interest payments
MONEY AND GROWTH
What grows faster, trees in the forest, cod in the ocean, or money in the stock market, or
compound interest?
Consider opportunity costs.
How do you maximize profits?
1. Debt
Alternatives to bank money-govt.
Money as a public good
100% reserve requirements and money creation through seignorage
Government spends money on public goods
Government issues money as basic income
$90,000 interest free government loan to 18 year olds?
Would it need to be a loan?
Alternatives to bank money-Mutual Credit and LETS
Alternatives to bank money-complementary currency
Alternatives to bank money-complementary currency
Alternatives to bank money-complementary currency
Alternatives to bank money-complementary currency