From scarcity to abundance
At some point we may not need more products and services, and even if we believe we do, we may not be able to go deeper into debt to buy everything we desire. As a consequence businesses will find it more difficult to make a profit. This is why interest rates have gone down in recent decades and may go negative in the future.
The miracle of Wörgl
In 1932, in the middle of the Great Depression, the Austrian town of Wörgl was in trouble and prepared to try anything. Of its population of 4,500, a total of 1,500 people were without a job, and 200 families were penniless. He came up with a solution. And soon a miracle occurred.
Joseph in Egypt
Natural Money was already in use more than 2,000 years ago in ancient Egypt. Accodring to the Bible, there was a fellow named Joseph who advised the Egyptians to store food in large storehouses. The Egyptians followed his advice and built storehouses for food. The food helped to create a financial system.
What is money?
Money has been invented to make trade easier. With money it become possible to buy and sell stuff and to keep track of debts. But the value of money is just a belief. Most money we currently use is debt. The value of our money depends on debtors being able to repay their debts.
What is the use of banks?
If people promise to pay this might suffice for payment. But with a large group of people it becomes difficult to track all these promises to pay. That is where banks come in. They administrate the debts so that people can use them for payment. This is the magic trick banks perform. They turn debt into money.
How the financial system came to be
Once upon a time when gold was money, goldsmiths rented safe storage to other people because their vaults were well-guarded. The goldsmiths were also in the business of money lending. And so they came to lend out other people’s money. This was the beginning of modern banking.
The problem of interest
Suppose that Jesus’ mother had put a small gold coin of 3 grams in Jesus’ retirement account at 4% interest in the year 1 AD. Now suppose that the account was kept for his return. How much gold would there be in the account in 2017? It is an amount of gold weighing 11 million times the mass of the Earth. But there another, and much harder to solve, problem with interest.
How interest rates are set
Interest rates depend on the supply and demand for money and capital. After World War II conditions have been relatively peaceful and in recent decades markets have been liberalised, which allowed capitalists to build up an unprecedented amount of capital. This development pushed interest rates down. Interest rates may need to go negative in order to allow the capital buildup to continue in a floursing economy.
Feasibility of Natural Money
Will Natural Money become the money of the future? And what are the consequences? The financial system could become stable, the economy could flourish, there could be more capital and wealth, the economy could be made sustainable and wealth could distributed more evenly. It could happen.
Free money for everyone
We may need an income guarantee in the future as machines will be replacing humans. This argument is often brought forward by advocates of a universal basic income. It is however not certain that humans will become obsolete as workers and how long that will take. The transition from human labour to machine labour is likely to become a gradual process and a universal basic income may not be the best solution to deal with it.