When I was eighteen years or so I once read The Limits of Growth. That’s depressing stuff, most notably if you’re young and expect to live for another sixty years or so. Doom seemed imminent and I would probably live to see it happen. That was the moment when my views about the future turned grim. Before that I hardly had views about the future at all. A few years later I became an environmentalist and a member of Friends of the Earth in Groningen. Friends of the Earth does research and tries to convince people that they should change their lifestyles. Friends of the Earth also lobbies with politicians and pressures corporations. And sometimes we protested.
One day we blocked the entrance of Groningen Airport to protest against the government subsidies for the airport. The city council felt that Groningen needed an airport but Groningen wasn’t big enough to make it profitable. When we were sitting there, the police came to remove us, and it suddenly became clear to me that activism didn’t help. Politicians will be voted out of office when they are serious about solutions. Businesses will go bankrupt if they take appropriate action unless all other businesses do the same. The required measures are extremely costly and will affect our lifestyles so profoundly that it would never happen in the current political and economic system.
Once being over a cliff, a cartoon character can only clutch at a straw. And only in cartoons the straw might hold. Friends of the Earth in Groningen worked together with the Strohalm Foundation. The meaning of the Dutch word strohalm is straw. According to Strohalm, the economy must grow because of interest, and that’s destroying the planet. It is ‘grow-or-die’ because interest rates need to be positive. Any solution begins with ending interest, they believed, and interest causes a lot of other problems too, like poverty and financial instability. Strohalm’s idea was banning interest and charging a fee on money as Silvio Gesell had proposed, so that it would be attractive to lend out money without interest.
Economists didn’t take interest-free money seriously. If you can receive interest elsewhere then why would you lend out money without interest? And if you can borrow money at an interest rate of zero, you would borrow as much as you can and put it in a bank account at interest. Therefore, interest-free money with a holding tax would never work, at least so it seemed, and it didn’t take long before I realised that too. Only, that wasn’t satisfactory. Accepting doom is not much unlike committing suicide. If interest is the root of so many social and environmental problems, and may destroy human civilisation, you can’t ignore that. And perhaps it could work. During the Great Depression it had been tried in a small Austrian village and it was a stunning success.
For years I used public transport as much as possible, but at some point I began to realise that it was all pointless. More and more people started driving SUV’s. They didn’t care. And they were burning up the fuel I was saving. So it didn’t matter what I do. Harmful products and services like cars make your life more comfortable. And I had no higher morals than other people.
A few years later, in 1998, I became a freelance IT specialist. I made a lot of money so I had some money to invest. My first investments were small and not very successful. That was because I believed that the profits of corporations matter. But investments in loss-making internet startups did very well while profitable corporations did poorly. And so I came to believe that I had to stay informed about the developments in the financial markets. In 2000 I joined the investment message board Iex.nl.
On the message board was a day trader who shared all kinds of conspiracy theories with us. For instance, if the markets were about to collapse, a secret group called Plunge Protection Team would come to the rescue. He was ridiculed, but after the internet bubble popped, the markets often miraculously recovered when they were about to crash.
And gold often crashed because of sudden selling. The day trader believed central banks wanted to keep confidence in their currencies. As long as the gold price didn’t rise, he claimed, people would trust central bank currencies. This was new to me, and probably it isn’t true, but I already had bought some gold because I didn’t trust financial markets and the people operating them.
In 2001, after the Internet bubble had popped, I pitched the idea of interest-free money on the message board. My lack of knowledge was eclipsed by my zeal and lengthy discussions followed. On the Internet people from different backgrounds and different knowledge can be in one virtual room and participate in the discussion. I was rebutted time after time, but as these discussions went on, my knowledge of the financial system increased and I became aware of the issues that had to be resolved in order to make interest-free money work.
As a gold investor I became familiar with the Austrian School of Economics. This group questions money creation by banks and the need for central banks. They pointed at the inflation caused by money creation and central banks. At some point all the debt banks create would eventually collapse the financial system and money would be worthless, they believed. They didn’t think that negative interest rates are possible.
And so two opposing fringe ideas, interest-free money with a holding tax and Austrian School, were challenging each other in my mind, which may be how Hegelian dialectic is supposed to work. In 2008 that became the start of Natural Money. The economy can do better without interest so returns for investors can be higher. As positive interest rates are not allowed, the money may rise in value, so that interest-free money can give better returns. Hence, interest-free money was possible, perhaps even inevitable. In the decade that followed I have integrated modern main stream economics into the theory of Natural Money as it is now. This research can be found on the website Naturalmoney.org.
Featured image: Roadrunner and Wile E. Coyote. Warner Bros. [copyright info]