I think the following could be interesting to read and think about.
Better Social Services Without Taxes!
by Per Almgren, MSc
This sounds like an impossibility to stressed out county officials and finance
ministers, but is in reality attainable. The theory allows for a basic income for all
citizens. The problem with "black market" jobs and illegal exchange of work will
disappear. Shorter work days and better general health for the citizens are possible.
How can this ideal be accomplished? Those of you who are content with the current conditions and do not want any changes in the way money is used should stop reading now!
Nature's "economy" is basically driven by incoming sunlight. It contains radiation which is converted into chemical or mechanical energy. This energy is used in various ways by living organisms before it gradually transforms into heat radiation and dissipates into space. The interesting thing about nature's economy is that its resources are utilized as long as possible. There is no unemployment among microbes, plants, or animals.
The monetary system human beings have created doesn't work quite that well. We have unemployment and people working overtime to the point of "burn out". We have large differences in income and wealth, as well as a more rapid destruction of peoples' and other species' quality of life and survival abilities. Our money and speculation economy is very similar to a
cancerous tumor with its uncontrolled growth that finally destroys its host organism and therefore destroys itself.
If you analyze our economical system thoroughly you find that the demand for growth is based on interest (which ought to be correctly called usury) on money (dividends on capital) and that these interest earnings are only partly used to purchase goods and services.
A basic requirement for a stable economy then is that money in itself should not generate interest, or at least that interest should be used for direct consumption. Interest earned should not be added to the capital.
Note that there is a difference between "interest earned" and a "surplus of funds" within a company selling goods and services. The former means an income based only on the ownership of money without corresponding production of goods. The latter means that you produce a product which people need, want, or enjoy. It then becomes a question of how much to pay out in
wages and salaries, how much to put back into the business for research and development, and how much to pay out in dividends to the owners of the company. In the case of owners only having invested money, the dividends become a form of "interest earned", although with no set rate beforehand.
A big problem is that the largest amount of money in the economy is saddled with interest. This is true for all moneys created in the banking system through interest on loans. The sum of the funds created by banks through interest is much higher than the sum of all printed bills and minted coins.
In the US. the Federal Banks are privately owned. This means that the American tax payers are really paying the interest on money.
In Sweden, money was until recently issued by the government through loans from the Central Bank. These loans are in reality interest free, since the interest the state pays the Central Bank generally is returned to the state as surplus.
A couple of years ago the Swedish parliament, foolishly, decided that the Swedish government no longer should be granted loans from the Central Bank. The reason for this decision was that the country needed to adjust to a European Union directive and prepare to join EMU (European Monetary Union).
If we want to change our economy for the better, we have to change the properties and function of money. Money should primarily facilitate the exchange of goods and services among people. It should not be a means of acquiring wealth through other people's work with no corresponding effort of one's own.
To achieve what is suggested in the introduction of this article, the following changes are needed:
The money required to pay the expenditures of the public sector for basic incomes are deposited into citizen accounts in a government bank. These accounts generate no interest and deposits to it can only be made by the government. Withdrawals from this account cannot be re-deposited into the account.
Cash withdrawn decrease in nominal value as time passes. On the bill is printed a chart which shows what the bill is worth on different dates. Some time after printing a bill, let's say 100 days, the value that at the time of issue was 100 money units is now only worth 50 money units. After another 100 days, the value of the same bill is 25 money units and so on. This means that it does not pay to keep more cash on hand than is needed for the moment, nor to have money available for speculation, unless the gains are unusually large.
Charge accounts, or accounts with new requirements in order to withdraw funds due to liquidity demands, will generally have the same gradual decrease in value of deposits as cash does.
It is also possible to organize independent financing in a co-operative manner or in existing banks. How well that will function depends on how deposits and withdrawals are balanced, keeping the time in the bank as short as possible. Long term savings, with a minimal decrease in value of deposited amounts, are then possible to arrange.
As people receive deposits to their ordinary accounts they will use the money as soon as possible towards purchases of goods and services. It becomes advantageous to pay someone to perform a worthwhile job rather than to hoard the money which gradually looses its value. Unemployment will be much lower than what we have seen during the last couple of decades.
Each individual's savings will primarily depend on not withdrawing money from the basic income account. Instead you would pay for your expenses through your own work efforts. An alternative to saving large sums for expensive purchases would be to buy on time.
At the time of pay outs of wages to the public sector and purchases of goods and services, money is transfered to ordinary accounts which gradually decrease their nominal value or is paid out in cash, whichever is preferred. Companies in the private sector make profits from selling their products to the public sector, from public employee purchases, and everyone's use of
cash withdrawn from their basic accounts.
The advantage of this kind of money, where its nominal value gradually decreases, is that we no longer need to pay taxes. No income tax, no sales tax, no employer's tax. All speculation based solely on ownership of funds will be more difficult. The only taxes needed are those that make products which are bad from an environmental perspective more expensive. These taxes
would subsidize more environmentally friendly alternatives.
When the employer's taxes and income taxes disappear there is no longer a need for "black market" jobs. In fact they will automatically become "white". Society will function better and can afford a shorter work day.
Instead of doing something you are not trained to do, spending many hours on the project, you can afford to hire the person best qualified for the job.
The basic income should be sufficient to maintain a minimum standard of living during the various stages of a person's lifetime. In case of severe handicaps, extra money would, of course, be paid out.
If society wants to control the amount of funds available it can be done by either increasing or decreasing the amount paid out each month, as well as speeding up or slowing down the rate with which new bills or ordinary accounts regulate their value.
You might protest that the constant addition of money would lead to a very high inflation rate. Most older people have heard or read about the extreme inflation in Germany in the 1920's. A stamp then cost several billion Marks.
The important difference in the system discussed here is that the number of money units doesn't increase. Each individual bill contains less money units as time passes. This means that the total number of money units in the economy, after an introductory period, remains unchanged. This way, no inflation is created by printing more bills or transfering money to the ordinary bank accounts.
How do you gain acceptance for money that gradually loses its value? Doesn't the majority of people prefer money that keeps its value? Evidently not. The experiences from the 1930's regional stamp scrip in the United States, Canada, and the local currency in the town of Wörgl, Austria, speak for themselves. Cash in these currencies carried fees that had to be paid
weekly or monthly in order for the currency to retain its value. In spite of this, the trade this system created became significantly larger than the corresponding amount of dollars or shillings.
The example from the island of Guernsey in the 1820's with a time limit on the value of money might be even more revealing. For a couple of decades the island enjoyed the best economy in Europe. It didn't decline until the English bankers with the help of bribes and pleading managed to push through the return of "traditional" money and interest.
Still another example is the money system that was used earlier in Europe during the centuries of the middle ages when the big cathedrals were built. At this time the circulating money was discontinuated once or twice a year and had to be delivered to the government. In return people got back money with another stamp upon it, but only for three quarters of the sum delivered. The rest of the value was used for governmental expenditures. And the economy flourished!
To achieve the above described system, Sweden has to stay out of EMU (the European Monetary Union) and also make sure it gains greater economic freedom within the European Union, or convince the remaining union members of the advantage of this arrangement so that every nation within EU will choose this system.
Per Almgren, MSc
A Readers Response:
Date: Thursday, December 28, 2000 5:00 AM
Subject: Re: New type of money solves a lot of problems
Dear Per Almgren.
By the good offices of my friend John Turmel I have received your fine post. You speak the language that I love to hear. The language of change and hope.
Amongst the instances of sanity that you use, you refer to the situation of Guernsey in the past tense. I am myself a Channel Islander, From Jersey, and I must tell you that this is not an historical "experiment" as so many believe, but a living method of running the islands economy.
The earliest reference that I can find is dated 1720 ad. and the battle goes on , for at the present time the islands are undergoing attack of the same type as you say Sweden buckled under.
As you know the islands refused to join the EU at the time of the treaty of Rome. Not because they were hostile to the idea of a united Europe, far from it, the Islanders are passionate Europeans, as am I. But what they refused to do, and the treaty demanded, was the giving up of their right to issue their own money, which they had done, interest free, for hundreds of years.
I would welcome your comments upon this and all the other issues that you raise.
Happy and prosperous new year to you.