How can you create no value and expect people to trade hard work in return for it?
When we create money by lending it into existence for productive purposes (as Common Good Bank communities are designed to do), then we, as a community, ARE creating value. That's what we mean by "productive". If you want a loan, you have to be doing something that will be of value to the community.
True, this system is based on faith, since at the time the money is created the value has not yet been produced. We as a community decide to create money for something we value, as an act of faith in the abilities and integrity of the borrower.
This is the way the system already works, in principle.
It is actually quite a good system. Except that it has been perverted and hobbled by removing all the good things from the system: community, values, integrity, and sometimes even faith. A system of democratic community banks will ensure that those good things remain an integral part of the system, so that it works to everyone's benefit.
The only reason that monetry systems of the world today work is because of peoples faith and belief in it. That is the root issue. Pretty much all currencies today are fiat currencies, backed by absolutely no intrinsic value or any kind of value whatsoever. We trade worthless paper or digital database entries for physical goods and services. This way of thinking is fundamentally flawed and deemed for failure, I don't see how this commongoodbank is any different. How can you create no value and expect people to trade hard work in return for it? You can't, unless you condition or coerce people into doing so, which is exactly how todays cultures operate.
Existing banks lawfully create money via the Fractional Reserve System, effectively multiplying your deposit 10 times by issuing new money as loans ("get your money for nothing, get your kicks for free").
The previous post misses the essence of what a Common Good Bank can and will do. It will also create money, in approximate proportion to Federal Reserve requirements and, like 97% of existing "money" in the money supply, this money will come into being – and eventually be extinguished – by keystrokes on a computer, forever existing only in cyberspace. It is of only minor concern if and when a physical currency (scrip) is added in order to facilitate more exchanges, being more practical in some cases.
The beauty of the CGB model is its dynamic innovation that effectively allows money created as "local" (placed in circulation for specifically agreed upon community purposes, whether granted or loaned) to be automatically converted to dollars when they are needed for purchases outside of the network of businesses and individuals comprised by the Community Division.
This confusion of these terms, money and currency, can obscure the true power of this wonderful instrument. With only 100 depositors, each with an account containing $4,000 (the national average), we will be able to create and control, for the common good, approximately $4 Million! Exactly what amount can be created can only be learned through experience and experimentation – but that's the potential.
The difficulties normally associated with implementing a local currency (ordinarily only in scrip) are circumvented and its nemesis (converting to dollars on demand) is slain.
Post edited 11:25 pm – February 21, 2010 by wspademan
Philip Beard said:
…there's no way for the local money to come into existence quickly or easily, and lacking the degree of organization and consensus required to set up the bank branch and related agencies, it never will… we need an effective starting point. Doesn't it make more sense to find that point in existing structures (the web of businesses, governments, non-profits, and individual citizens) than in a new structure that will require a lot of energy and time to create?
Starting a bank is difficult but not impossible. Yes there are other easier worthwhile things that can be done. But it is well worth the effort to create a comprehensive community-based democratic economy that can empower communities everywhere. The web of starting points that you mention has been around for a long time, but it has not yet resulted in a Common Good Bank. It certainly won't happen unless we make the effort.
As described, the local money issued will be valued by the public only to the extent that the local Common Good bank branch is valued. And that bank branch doesn't exist yet; it has to be formed by people (at least 50, according to your criteria) who agree to abide by CG's overall mission and (somewhat complex) operational methods. So there's no way for the local money to come into existence quickly or easily, and lacking the degree of organization and consensus required to set up the bank branch and related agencies, it never will.
So why not start instead with something that already exists: trusted local merchants, and/or local government? Rather than relying on the uncertain establishment of a network of agencies (including the bank) dedicated to the CG principles, and having the bank create local money by lending it to merchants, why not allow those merchants (and/or local government, as per your Agville example) to spend the money into existence themselves, simply debiting and crediting each other's accounts via the credit clearing mechanisms described by Tom Greco?
Your goals and vision are admirable, and the attention you've paid to achieving democratic participation is remarkable. But in order for these visions to become reality, we need an effective starting point. Doesn't it make more sense to find that point in existing structures (the web of businesses, governments, non-profits, and individual citizens) than in a new structure that will require a lot of energy and time to create?
Credits for community service can serve as currency. The tax per person must be equal, the amount paid per hour must be constant and the budget must be balanced. They can be paper scrip, tokens or entries on a ledger. The American colonies had tremendous success with this system before it was outlawed by the British, triggering the War for Independence. Bills of credit were permitted under the Articles of Confederation but outlawed again under the U.S. Constitution. Community service is a tax on time and everyone values their own time equally.
Richard, thank you. Your article is well written and makes many important points. Beware, though: the notion that interest can never be repaid because it is never explicitly created is a fallacy. See my post on this subject: http://commongoodbank.com/2009/10/general/the-evil-interest-fallacy
I saw you at MUM open mic, and looked up your website.
I have had a strong interest in money since that is THE major stress of the world today. I have been trying to put the Raam into circulation (Maharishi's global currency), but have been unable to get the movement leaders to even talk to me. According to a Jyotishi, I should just wait for a year and a half, and they will contact me when they need someone.
I believe you will find both links very useful. My heart is set on fulfilling Maharishi's goal for the Raam and his Global Bank. I will maybe wait for when the time is right for it, or see what Nature has in mind for me.
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