1. Money: Capital or anti-capital?
From speculation whirlpools to Burlington Bread, the impact of money on sustainable community development

2. Outline What is money? Is the existing system for money creation just?
How can speculative investment (in contrast to productive investment) undermine community development?
What is an alternative?

3. I. What is Money? Medium of exchange Store of value Unit of account
What backs up the dollar?

4. A Short History of Money
C= commodity M= money
C-C*
Barter
Coincidence of wants
C-M-C*
Money as a medium of exchange
Use value
What happens when you amass more commodities than you can consume?

5. A Short History of Money (cont.)
M-C-M*
M*>M
Exchange value
What happens when you amass more money than you can consume?
Money fetish
Money as a store of value
M-M*
Speculation
Overwhelms the buying of real goods and services
What is produced?
Redistribution

6. How is new money created?
When the economy grows, more money is needed to chase more good and services
Seigniorage
Difference between value of money and cost of printing it
What percent of your purchases are with cash?

7. How is new money created?
Credit and reserve requirements
Reserve requirements: bank must have cash to cover about 5% of deposits
$100 dollar deposit allows bank to make $2000 in interest bearing loans

8. Money creation by banks
Money is destroyed
When bank is repaid
+ interest
Do Banks Create the Value that Requires New Money?

9. Interest payments and distribution

10. Speculation Stock markets, real estate
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.
Trading $1000/second, how long would it take to trade 2 trillion dollars?
How long has this been going on?

11. Speculation and instability
Financial bubbles: Loans to purchase stocks, real estate
Positive feedback loops
International speculative flows
Rate of change and our understanding of the economy
Herd behavior
Tequila crisis, Asian flu, etc.

12. “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

13. Financial capital and natural capital
What grows faster, trees in the forest, cod in the ocean, or money in the stock market?
How do you maximize profits?

14. Financial capital and human capital
What happens to jobs when the stock market crashes?
Great depression, tequila crisis, Asian flu

15. Financial capital and social capital
Social capital = the norms and networks that enable collective action. Trust. Social cohesion
Any links between speculation, income distribution and cohesion?
Do you trust the speculators?

16. Financial capital and built capital
Investment in productive capacity might bring returns of 7%/yr. when the economy is doing well, while the stock market might earn 16%.
Boom 90s and stock buy backs
Financial contagions and the impact on built capital

17. Regaining community control over the power of money
Community Currency
Regaining community control over the power of money

18. Why community currency?
Cyclical nature of money creation
The Great Depression
Business cycles
Example: The Worgl
Who creates the value in money?
So who is entitled to seigniorage?

19. How do they work?
IOU is destroyed or used again

20. Seigniorage and Burlington Bread
Seigniorage and complementary currencies
Seignorage and public goods

21. Goals of community currency
Value goes to those who create it
Community has control over money supply
Interest free