Money, the Commons, and Growth Oct. 24, 2003 Gary Flomenhoft Gund Institute

“INVISIBLE BOOT”

system

“MONEY SYSTEM AS A PURE PUBLIC GOOD” Rival} Non-rival} ExcludableNon-Excludable Market Good: land, timber, fish once captured, farmed fish, waste absorption capacity? Potential market good but 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, timber etc. from unprotected forests, waste absorption capacity, roads(congestible)

VALUE OF COMMON ASSETS

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’ = barter C-M-C’ = money as a medium of exchange M-C-M’ = mercantilism, money as a store of value and end in itself M-M’ = speculation, money as a way to redistribute real wealth

A Brief History of Exchange Speculative exchange in the global economy Buying and selling of goods and services is about $30 trillion per year globally Buying and selling of paper is about trillion per day, or 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 = 93% BY BANKS!

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 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