The Ecology of Money: Debt, Growth, and Sustainability

"Modern economics must 'grow' because money borrowed for investment can be repaid only by expanding production and consumption to meet the burden of usurious rates of interest. The roots of this dynamic between debt and growth lay in the financial revolution of the late seventeenth and early eighteenth centuries in Britain, which establish a new usurious monetary system.

"For the first time in history credit was made widely available, but only on condition of an exponentially increasing debt burden. To pay back debts, production had to increase correspondingly, leading to the industrial revolution, economic 'growth,' and modernity itself. Though private creditors grained a monopoly over the creation of credit, and were disproportionately enriched, the resulting economic growth for a time was great enough to benefit most debtors as well as creditors, ensuring widespread prosperity.

"That is no longer the case. With today's eco-crisis we have reached the limits of growth. We no longer have the natural resources to grow fast enough to pay our debts. This is the real root of our current financial crisis. If we are to live sustainably, our system of money and credit must be transformed. We need a non-usurious monetary system appropriate to a steady-state economy, with capital broadly distributed at non-usurious rates of interest. Such a system was developed by an early nineteenth-century American thinker, Edward Kellogg, and is explored here in depth. His work inspired the populist movement and remains more relevant than ever as a viable alternative to a financial system we can no longer afford." 

--  from the blurb on the back cover of The Ecology of Money

The Ecology of Money was published by Lexington Books in 2013 and is available at Amazon.com  

A Summary of the Argument of The Ecology of Money in 10 Points:

1. Our ecological crisis is a consequence of the productive effort we must make to meet the demands of our financial system. This crisis is upon us since we no longer have the natural resources to sustain this effort.  

2. The roots of this financial-economic dynamic lie in the financial revolution of the seventeenth and eighteenth centuries in Holland and England, where credit and finance as we know them were invented.

3. Unfortunately, this financial revolution as completed in England: a) privatized credit, giving bankers a legal monopoly over money creation through issuing loans; b) created a national debt and a central bank to backstop private lending; and c) allowed bankers to charge high (usurious) rates of interest on loans. The Bank of England became the symbol of this "English system," as Alexander Hamilton called it, which was subsequently exported to America and most of the modern world. American populists called it "the money power."

4. Once key sectors of the economy came to depend on money borrowed at usurious rates of interest, it became necessary to keep expanding economic output. The obligation to repay such debts is what forced modern economies into endless "growth." Traditional, steady-state, reciprocal, sustainable economies were displaced by economies relentlessly seeking out new markets, technologies, resources, and laborers, and the industrial revolution -- and what we call "modernity" -- was born.

5. More than two centuries of economic "growth" have given us the miracle of the modern world, with all its astounding wealth and technology. That miracle has also exhausted our planet, which now staggers under the cumulative effects of resource depletion, pollution, overpopulation, and climate change. Insofar as the limits to growth have been reached, we can no longer hope to repay our debts, as in the past, by growing our way out of the crisis. 

6. Our "too big to fail" financial system has succeeded in transferring much of this excessive debt onto taxpayers, postponing and likely intensifying the final reckoning. We are further burdened by a dysfunctional political system -- largely corrupted by the same financial interests -- which is less and less responsive to the urgency of reform, which may now be impossible. 

7. The now inter-woven ecological and financial crisis is likely to play itself out no matter what we do. If so, the survivors will need to adjust to a dramatic downsizing and a return to sustainable economic practices. If civilization survives, it will need a financial system compatible with a steady-state, non-growth economy. 

8. The outlines of such a system actually exist: they were developed by a nineteenth-century American financial theorist, Edward Kellogg. He proposed a decentralized system of public banking, where citizens could borrow on good collateral at a non-usurious rate of interest fixed by law at one percent. Kellogg's system, which inspired American populists, is a model for financing a future sustainable economy.

9. To say that we can no longer tolerate exponential growth as we have known it is not to say that human ingenuity has no future, that profound innovations in human life are no longer possible, or that the vast store of scientific and technical knowledge born of the industrial revolution cannot be adapted to new circumstances. A sustainable, steady-state economy is not necessarily a static or primitive economy, though likely it will be a far more modest and prudent one.

10. Our immediate prospects, however, remain daunting. Human history has long swung between extremes -- boom and bust, feast and famine, peace and war, the rise and fall of civilizations -- and we have no reason to believe our era is exempt from that ancient dynamic. We are a resilient species, and the silver lining of any crisis has always been the opportunity to learn from our mistakes, an opportunity perhaps not otherwise possible. Let's make the best of it.

Demolishing the “neutral” money theory

"If money was neutral, as many economists would have us believe, we should release all the thieves of money because they would not have stolen no value"

This repeated the Professor. Auriti when in the various debates and economic texts came across the concept of neutral value of money. Therefore, by logical-legal deduction, according to this definition of neutrality of money, a neutral value does not involve any substantial difference and therefore it would be indifferent to have money in your pocket or not, both because it is a paid job or you have it as proceeds of theft.

The unfounded on the neutrality of money manifests itself under the logical point of view, legal and economic. From the logical point of view it is clear that it is very important to have money in your pocket or not have it.

From the legal point of view the currency is a collective good as created by social convention to measure and incorporate the values, good with financial content and repeat-use and owned by the bearer.

Not surprisingly, the money is considered as "movable property" and the goods have of course an owner as they are objects of law movable property. Otherwise you could not accuse the thieves for theft. In the case of money, however, central banks have reached such a degree of professionalism appropriating other people's resources, by having consolidated in themselves, and in governments, the belief that they have the right to do so, through a real form of legalized theft, blatantly unconstitutional.

The obstacle on which all economists stopped it is based on the original error to have not define the currency as legal case and the same law as an instrument, or right itself, and that is, as an expression of their own value, different from that of the asset covered by the law. On this initial misunderstanding, it is purported to justify the monetary value on the basis of the gold reserve and confusing impersonating under the guise of credit value, the induced value, ie configuring the currency, not as a measure of value, but as the title of credit representative of the reserve. Money is not credit but the object of credit.

Besides, if it were true that the reserve is used to give to currency the purchasing power, after the abolition of the Bretton Woods Agreement, and with the abolition of the gold reserve, the dollar would have totally lost its value: while not only it did not lose value, but it has replaced gold as monetary base in the world monetary system.

From the economic point of view the statement that the money has a value neutral is removed with irrefutable data that provides us with Pierluigi Paoletti, a member of the Scientific Committee of the School of Legal Studies and Money "Giacinto Auriti" and director of CENTROFONDI

Many economists say / write that the role of issuer of currency is neutral.

Just a chart to demolish their claims. Look carefully at the graph of % variation year-on-year of industrial output and money supply (M1) in America being compared:

If you notice the money supply (blue line) conditions anticipating the trend in industrial production following the increase or decrease in the money supply. In practice, the economic cycles are nothing else the dynamics induced by the opening / closing of the "tap" on money. The circle shows that industrial production is turning down after several months that the money supply decreases constantly.

Who then holds the power to issue currency determines the performance of the economy, beyond reasonable doubt, the prosecutor could say.

The other dynamic that is never considered it is the dynamics of the debt in the long run that has an exponential trend in 50/60 years and requires a system reset as a beautiful and powerful devastating war or a crisis to bring debt under normal conditions,

The exponential increase of the debt began in the late '70s to coincide with the season of the great privatizations and as this grew the economy was turned financial moving from an economy of production to that financial, because it allowed stratospheric gains obviously inversely proportional to those of the majority of the population that was being strangled by debt. Meanwhile, the debt also affects the economic growth that, to not being swept away, it needtry in vain to keep pace consuming huge quantities of natural resources.

At this point, those who say that money is a neutral element and that debt is a wealth, probably he misunderstood something although it is in good faith (which is not possible for economists).

Just as you see a single wise action on the "tap" Oxygen (M1) and the virus debt relating to the issue currency and the game of abuse are done without much effort. Do you think that with the divorce between the Treasury and the Bank of Italy in 1982 the Italian public debt went from 60% to 120% in 1992, has done that?. To think and say that the economy is a free market it is impossible if you put together the public and irrefutable data...… it is just that almost never does!

From: giacintoauriti.eu

Productivity and the Workweek

Erik Rauch

What if, instead of using productivity increases to buy more possessions, we used them to get more time instead?

Productivity has been increasing exponentially for more than a century. This is one of the most remarkable developments of all time. Until a few decades ago, this bounty has been used both for increased material comfort and for more time. However, in recent decades, the increase has been used exclusively to purchase more things; hours have actually increased in the US. Meanwhile, there has been little increase in subjective well-being in developed countries in recent decades. 
An average worker needs to work a mere 11 hours per week to produce as much as one working 40 hours per week in 1950. (The data here is from the US, but productivity increases in Europe and Japan have been of the same magnitude.) The conclusion is inescapable: if productivity means anything at all, a worker should be able to earn the same standard of living as a 1950 worker in only 11 hours per week. The following shows the number of hours per week needed to produce as much as a 1950 worker, using data from theUS Bureau of Labor Statistics, including both manufacuring and services:

 

Number of hours per week needed to produce as much as a 40-hour worker in 1950

In other words, the number of weekly hours needed to produce the 1950 worker's output declined by almost one hour per year until the mid-1970's, and has been declining by about half an hour per year since then.

Polls and surveys have shown that people in countries with the standard of living that the US enjoyed in the 1950's are no less satisfied than today's Americans. Indeed, many studies show that income increases people's subjective well-being only up to the point where basic needs are met. However, productivity has increased so much that we can have both the extra possessions and the extra time. Even since 1975, supposedly an era of low productivity growth and stagnation in living standards, officially measured productivity has increased almost 70%. The average worker would therefore need to work only 23 hours per week to produce as much as one working as recently as 1975:

 

Number of hours per week needed to produce as much as a 40-hour worker in 1975

And, if the productivity measures have any meaning, the average worker could have a 29-hour workweek if he were satisfied with producing as much as a 40-hour worker as recently as 1990.

Fast productivity growth is not necessary for reduced work time

Much is made of the rate of productivity growth and its relationship to worker well-being. Overlooked is a much more important fact: because productivity has been growing for so long, it is now so high that it can enable us to sharply reduce working hours while maintaining a high material standard of living. The most important thing is not how fast productivity is growing, but that it is already high enough. We don't need to wait for future productivity increases: the necessary increases have already happened.

Shorter hours and the notion of progress

Interestingly, as an article on labor history notes, shorter hours were assumed to be a natural consequence of increased productivity in the US until the 1930's, appearing in the platforms of all major parties, and the above shows how the workweek would have evolved had the trend continued after World War II. In Europe, reduced worktime has continued to be an issue, and the workweek has been declining in recent times, unlike in the US. However, even in Europe, the decline in work time has fallen far behind the increase in productivity.

Who benefits from productivity increases

According to official statistics, "labor's" share of national income in the US has remained constant over the last 50 years. "Labor", however, includes everyone up to Bill Gates. The troubling increase in income inequality in the United States means that many people do not share in the benefits of productivity increases. However, the potential is there. Furthermore, the increase in inequality is mainly an American phenomenon: it has not occurred, or has occurred on a much smaller scale, in other advanced countries.

Conclusion

The march of productivity is such that its increase in even as short a time span as a decade could be used to dramatically reduce working hours while living standards remained constant. 
 

Postscript

How long can the growth continue? Even if the supposedly slow rate of increase in recent times were continued, productivity would increase 120% in the next 50 years, and a 2050 worker would need to work 15 hours to have the same real income as a 1990 worker (or less than 6 hours to have the same income as the 1950 worker):
 
Output per hour, projected based on 1975-2000 rate of increase; 1995 = 100
Of course, here we may have stretched the usefulness of the official definition of productivity much too far, and exponential growth cannot continue forever, but however productivity is measured, the increase and its relationship to the potential for workweek reduction is too big to ignore. 

Source: http://groups.csail.mit.edu/mac/users/rauch/misc/worktime/