The Money Fix

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tomaquet
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The Money Fix

Has anyone seen the documentary film “The Money Fix”?

http://www.themoneyfix.org/index.php

It looks really interesting and quite timely too. Of particular interest to me are the interviews with Bernard Lietaer and Thomas Greco.

I can’t tell how new it is - imdb says 2009, but in an interview with the director he said that he had released it before, but has made some more changes recently.

Still, if anyone has seen it, your opinions would be appreciated as well as advice on how/where/when I can actually see it! I’ve emailed the director, but haven’t received any reply yet. (I’m guessing I’ll have to wait for a dvd release seeing as I live in Spain…)

 

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tomaquet
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Re: The Money Fix

Well, I thought I might as well answer my own question. It’s now for sale on DVD so I bought it and can thoroughly recommend it (please note that I don’t have any ulterior motives for recommending it – i.e. I don’t profit from sales). Unfortunately it doesn’t seem to have had a very wide cinema release.

The film centres on themes such as money creation and debt and the way in which it affects us in an obvious economic sense and more broadly in a psychologically sense at a social level.

The central argument in the film is based on the fact that money is created as debt with interest. Because the interest isn’t also created this means that not all of the debts can be repaid unless more debts are taken out. Hence the exponentially impossible ever-increasing money supply.

There is a brief summary of how the current monetary system came to be, a reflection with permaculture and natural systems and finally some possible solutions including: complementary currency; time-based currency; credit clearing exchange; LETS; commercial barter exchange.

The style of the film is fairly standard for this type of documentary – talking heads interspersed with “money as debt” style animations and archive footage of key events such as the great depression. Overall it is well made and easy to understand - suitable for monetary-reform beginners but with enough substance to keep those already familiar with the basics interested. Interviews include monetary reform leaders such as Thomas Greco and Bernard Lietaer, as well as political/social activists such as Noam Chomsky, Fritjof Capra, Hazel Henderson and Michael Albert.

To get a taste of the film there are some podcasts/interviews on the website under “interviews”: http://www.themoneyfix.org/

 

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DrKrbyLuv
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Re: The Money Fix

tomaquet - I haven't viewed the video but I am familiar with Bernard Lietaer's book The Future of Money.

He was/is part of the central banking scheme (Central Bank in Belgium, co-designed the single European currency system).  The Future of money is bankers BS.  Why in the world would we want to continue with central banks like the federal reserve?  They are the problem

He talks about adding "complimentary currencies", I say, end the oppressive central banking scheme instead.  His mumbo jumbo is meant to confuse rather than address some basic facts like...why do we need central banks?  Why shouldn't we issue our own money, for free?

Sorry if I rained on your parade, but this guys a NWO shill.

Larry

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tomaquet
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Re: The Money Fix

I think the fact that Bernard Lietaer was a central banker and co-designer of the Euro currency gives him a unique experience into the subtleties involved in the money creation process. From reading his recent papers and articles (and his comments in the film) it is obvious he is aware of the problems involved with the current system. In this paper from his website he quotes all the usual American presidents who railed against central bankers (Jackson, Jefferson, Lincoln, etc)

http://www.lietaer.com/images/Sapiens_text_final.pdf

His solution of introducing complementary currencies stems from the unholy dichotomy of either letting private banks or government control the money supply. Lietaer is rightly critical of the current system where central banks have abused their position but is unconvinced that passing this power to the government would be any better:
“it might protect us from banking crises, but not from monetary crises”
(quote from paper)

The only remaining option is to restore the right of credit creation to the public (NOT banks or government who are easy to manipulate). This can be done through a variety of mechanisms, one of which is using complementary currency. You even agree with this in your post.

“The Future of money is bankers BS”
Just a question – have you read The Future of Money? (You said you were “familiar” with it, but it doesn’t mean to say you’ve read it).  I haven’t read this book, but have read his other work (and seen what he says in the film) and it surprises me you came to this conclusion. From reading reviews of it on amazon, every other reader suggests that Lieater is very critical of the current system. I get the impression from your quote (maybe incorrectly) that you read that Lietaer was a central banker and is therefore automatically in favour of central banks – a conclusion which is incorrect.

“why do we need central banks?”
I think he would agree with you that we don’t, but also understands “The most important reason that this solution is unlikely to be implemented is that it will be doggedly resisted by the banking system itself.” (quote from paper). The public would slowly move over to complementary currencies or credit exchanges such that the demand for central bank issued currency would diminish. At some point their power would have diminished sufficiently to give them a final lethal blow.

“Why shouldn't we issue our own money, for free?”
It depends on what you mean by “we”.
If you mean the government, then they will almost certainly manipulate money creation to the detriment of the public. (see paper for more details)
If by “we” you mean the public, isn’t that exactly what a complementary currency is? Money (or credit) created by the public, for the public. (Note, other possible systems include credit clearing exchange and commercial “barter” exchange)

“His mumbo jumbo is meant to confuse”
I’m not sure what you mean by this – I’ve found his work intelligent, logical, mature, and really pinpoints exactly what the concept of money is and who should have the right to create it.

Tomaquet

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DrKrbyLuv
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Re: The Money Fix

Tomaquet,

Thanks for the response.  My disagreement with Bernard Lietaer's suggestions is of a fundamental nature.  He is knowledgeable about the current role of central and private banks and if you a gaining a better understanding of the system than I think you have made your investment in time worthwhile.  I want to respond to your specific questions/comments:

Tomaquet said:  From reading his recent papers and articles (and his comments in the film) it is obvious he is aware of the problems involved with the current system. In this paper from his website he quotes all the usual American presidents who railed against central bankers (Jackson, Jefferson, Lincoln, etc)

I was glad to see him cite the money heavy weights who have railed against the private banking monopoly.  From my perspective, he uses these quotes as a straw man in that he diffuses their objections by stating:

"One objection to a government managing the monetary system is that governments may abuse this power, issue more money than is appropriate, and thereby create inflation. That argument is valid. Given that the current method of creating money through bank-debt has made the 20th century one of the highest inflationary centuries on the historical record, however, inflation is obviously not a problem specific to the process of money issuance by governments.

Furthermore, there is no reason that Milton Friedman’s proposal for the issuance of money by the central banks couldn't’t be applied to governments as well: put in place a rule that obliges the issuing body to increase spending by no more than a fixed 2% per year, reflecting the improvements of productivity in the economy. The most important reason that this solution is unlikely to be implemented is that it will be doggedly resisted by the banking system itself. The financial system has always been and remains today a powerful lobby, and losing the right to create money would hit them at the core of their current business model."

We already know that central and private banks have greatly abused their monopoly.  He doesn't discuss it, but private banks have a glaring conflict of interest in serving profit motives as opposed to the interests of "We the People."  And there is a fundamental issue that needs to be discussed - no nation can maintain their sovereignty when their greatest power has been outsourced to an elite group of bankers.  This is also a national security issue as anytime they want, our central bank may shut down our money supply.  Bernanke has already hinted at this when asked by a congressional committee "what would happen if the Fed were audited" he responded that it may mean dire consequences to our economy. 

A straw man is offered in saying that "government may abuse this power, issue more money than is appropriate, and thereby create inflation."  The inflation consideration is based on the Keynesian quantity theory of money.  The theory contends that inflation is caused by by too much money for too few of goods, when demand money available increases faster than supply (goods and services) prices are forced up.  The fallacy of this theory is the assumption that the money loaned by banks is already in existence and is simply being recycled.  If the banks were lending their money this may hold true, but they aren't.  Around 97% of all money borrowed is created by banks through debt.  

More inflationary than the amount of money put into circulation is the interest debt that comes with every penny the government borrows from banks. The money supply must be continuously increased in order to service existing interest debt.  By nature, a debt based money creation system is inflationary.  Lietaer claims "When the issuing body to increase spending by no more than a fixed 2% per year, reflecting the improvements of productivity in the economy."  This is NOT reflective of improvements in productivity, it is the minimum amount of inflation required to maintain a debt based system and has nothing to do with productive or growth.  Why would we want to artificially limit the amount of economic growth?  I believe that we can grow at 9 or 10% (or more) a year without any inflation provided we control our monetary system.    

If new money is used to create new goods and services, supply would increase along with demand and prices would remain stable.  We have much anecdotal evidence of this through the history of greenbacks, Guernsey, Pennsylvania colonial script, China, etc.  In each case the money supply was greatly increased but it was not inflationary.

Lietaer says "The most important reason that this solution is unlikely to be implemented is that it will be doggedly resisted by the banking system itself. The financial system has always been and remains today a powerful lobby, and losing the right to create money would hit them at the core of their current business model."  When the private banks create money it is not a right, it is a monopoly.

We don't have to destroy the banking system to make the needed changes.  Banks could borrow 100% of the money they lend from the U.S. Treasury and then add their spread much like we do today.  The difference is that fractional lending could be eliminated and the national debt would cease to be.  Federal Income tax was created along with the Federal Reserve in 1913 as a means for taxpayers to directly pay off our interest debt, so if the Fed were eliminated, federal income tax and the IRS could also be eliminated.

Tomaquet said:  The only remaining option is to restore the right of credit creation to the public (NOT banks or government who are easy to manipulate). This can be done through a variety of mechanisms, one of which is using complementary currency. You even agree with this in your post.

I have no problem with complimentary currencies as long as they are complimenting something besides a private banking monopoly.  One way to de-centralize a "public" system would be for states to charter their own banks, complimentary to the Treasury.

Tomaquet said:  Just a question – have you read The Future of Money? (You said you were “familiar” with it, but it doesn’t mean to say you’ve read it).  I haven’t read this book, but have read his other work (and seen what he says in the film) and it surprises me you came to this conclusion. From reading reviews of it on amazon, every other reader suggests that Lieater is very critical of the current system. I get the impression from your quote (maybe incorrectly) that you read that Lietaer was a central banker and is therefore automatically in favour of central banks – a conclusion which is incorrect.

I have only read a few pieces of the book and a couple papers.  I'll concede that he is more critical of the current system than I had thought but my basic disagreement lies with his solutions.

Tomaquet said:  The public would slowly move over to complementary currencies or credit exchanges such that the demand for central bank issued currency would diminish. At some point their power would have diminished sufficiently to give them a final lethal blow.

I disagree.  The central banks have already taken control of our, and many other nations.  They are now moving to consolidate into a global system that will spell the end to all national sovereignty.  I agree with Jackson "they are vipers and I will route them out."

Tomaquet said:  “Why shouldn't we issue our own money, for free?”  It depends on what you mean by “we”.  If you mean the government, then they will almost certainly manipulate money creation to the detriment of the public.

The government has been abusing the current system for many years.  If we issued our own money we could discipline the government by adding a balanced budget amendment.  You may remember that some years back, there was much talk about adding such an amendment.  As mentioned before, our interest debt based system must continuously grow.  We now find ourselves in a terrible situation as government is acting as the borrower of last resort in order to keep the system from collapsing.

Tomaquet said:  “His mumbo jumbo is meant to confuse”  I’m not sure what you mean by this – I’ve found his work intelligent, logical, mature, and really pinpoints exactly what the concept of money is and who should have the right to create it.

My opinion is that he is obfuscating the truth.  This may be intentional or may be the result of a belief system that he subscribes to. 

Anyways, it's been a pleasure to discuss this with you, look forward to any comments you might have.

Larry    

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tomaquet
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Re: The Money Fix

Hi Larry,

Thanks for your reply. The main purpose of my previous post was to respond to your false accusation that Lietaer is in favour of central banks and the current money system, which you have later (partly) conceded is not the case. Anyway to continue the interesting dialogue, I’ve replied to a few of your comments below:

DrKrbyLuv wrote:

if you a gaining a better understanding of the system than  I think you have made your investment in time worthwhile

This really comes across as quite condescending – you really don’t know how much I’ve studied monetary reform. I’ll let it go because written forum posts often fail to convey the true meaning of what you actually wished to say.

I don’t really follow your argument against Lietaer’s statement regarding possible government abuse of issuance of money. The theory you described is (a simplified version of) the quantity theory of money but it was not Keyne’s theory. In fact he argued against it because he believed that the velocity of money changes in response to changes in money supply, and thus price levels are not directly linked just to the money supply. The theory does NOT suppose that the money is already in existence – in fact quite the opposite. The theory states that changes in the money supply (either by government issuance or by banks loaning it into existence) affect price level. Anyway, I still don’t understand how this would affect possible abuse by governments issuing too much money.

Possibly what you are trying to say is that you believe that price increases are primarily driven by debt and that the money supply has no effect on price level, in which case the government could in theory create as much money as possible with little effect on price levels. IMO it is almost certainly a combination of these two (and other) factors. At some point a government creating credit money would result in increased prices, no?

DrKrbyLuv wrote:

This is NOT reflective of improvements in productivity

I assume that Lietaer means that the amount of money created by the government should only increase as fast as the economy. He used 2% as that is the speed at which (at least nominally) most occidental economies grow at. I understand from the context that this money would be issued as credit, not debt. If the economy grew more quickly then you are correct in that the government would have to issue more money.

The danger involved in all this is that governments would want to print more money for temporary gain at the expense of long term inflation (not that central and commercial banks have been any good at controlling this either). Some separate institution would have to be created to control this but there is always the danger that they too would be subject to lobbyists and other pressures.

DrKrbyLuv wrote:

I believe that we can grow at 9 or 10% (or more) a year without any inflation provided we control our monetary system.

As a side point to the main discussion, I think the valid question is: why would we (western economies) want to grow at 9-10%? We know it doesn’t provide more happiness/security/fulfilment and the amount of energy needed would be tremendous (there is very little evidence of de-coupling GDP from energy use). IMO, there are limits to growth (at least calculated by GDP).

DrKrbyLuv wrote:

When the private banks create money it is not a right, it is a monopoly.

Hmmm. I’m not sure what you mean here. Banks do have the right (however unethical it may be) to create money. And they don’t have a monopoly. Central governments also have the right to make money (although it is currently very small in compared to money created by commercial/central banks).

DrKrbyLuv wrote:

We don't have to destroy the banking system to make the needed changes

That’s not what he says. He is referring to the type of reforms which you suggest. i.e. reforming to 100% money  - would almost certainly be “doggedly resisted by the banking system”. (Looking again at your post, maybe you were quoting me, not Lietaer – when I said give them a final lethal blow, I was referring to stopping commercial banks having the right to create money from nothing, not stopping banking as a whole)

DrKrbyLuv wrote:

I have no problem with complimentary currencies as long as they are complimenting something besides a private banking monopoly.

I personally agree with you on this, but I also accept Lietaer’s experience from within the system at how difficult it would be to change it. That’s not to say we shouldn’t try!!

DrKrbyLuv wrote:

One way to de-centralize a "public" system would be for states to charter their own banks, complimentary to the Treasury.

I agree – the bank of north dakota is a shining example of this. Other successful methods to decentralise money/credit creation include the bank of Guernsey, the WIR bank in Switzerland and Caja Laboral (a community owned bank of the Mondragon Cooperative corporation) in Spain.

DrKrbyLuv wrote:

I'll concede that he is more critical of the current system than I had thought but my basic disagreement lies with his solutions.

That’s fair enough – as long as we realise that you and Lietaer (and myself) are all attacking the same system.

DrKrbyLuv wrote:

I disagree.  The central banks have already taken control of our, and many other nations.  They are now moving to consolidate into a global system that will spell the end to all national sovereignty.  I agree with Jackson "they are vipers and I will route them out."

I agree this is the direction we are going, but think that changes will have to come from outside the political system. For this reason I like the idea of complementary currencies, credit clearing exchanges, commercial barter exchanges, etc. As stated before, that’s not to say that the current system shouldn’t be vigorously attacked too.

DrKrbyLuv wrote:

If we issued our own money we could discipline the government by adding a balanced budget amendment

This wouldn’t prevent (and would probably actually encourage) governments from creating more money than was needed for the economy.

DrKrbyLuv wrote:

My opinion is that he is obfuscating the truth.  This may be intentional or may be the result of a belief system that he subscribes to.

From what I have understood, to him the truth (that of the injustice in the current system) is self evident and doesn’t needed to be re-stated with every article. Note that the article I posted was actually regarding resilience in monetary systems not an attack on the current system. He makes a valid case as to why complementary currencies would make the system more resilient to unforeseeable shocks (black swans) in comparison to a single currency (regardless of who is creating it).

I believe Lietaer’s discourse goes beyond the age-old debate of whether money should be issued by private interests or by government, and tries to restore, what Thomas Greco describes as, the “credit commons” back to the people (not government). The main problem with using centrally issued money (either by banks, government, or even local state banks) is the fact that the system of interchange of goods and services is centralised to those that have the right to create this credit (or debt in the case of our current system). Given a group of traders that only want to trade among themselves in a closed circle, why do they have to pay (with some of their own goods and services) those that currently have the credit-creating medium to exchange their products? True liberalisation can only come from allowing everyone access to exchange their goods and services without the need of a third party.

Anyway, thanks for your thoughts,

T
 

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DrKrbyLuv
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Re: The Money Fix

tomaquet,

It's an interesting discussion but we have some fundamental disagreements that may be creating an impasse. 

tomaquet said:  The theory states that changes in the money supply (either by government issuance or by banks loaning it into existence) affect price level.

I mentioned earlier this is not true.  If the money supply grows along with an increase in products and services, then there will be no inflation.  I stated several examples of instances where the money supply was heavily increased without inflation.  This is a point that we simply disagree on.

tomaquet said:  The danger involved in all this is that governments would want to print more money for temporary gain at the expense of long term inflation (not that central and commercial banks have been any good at controlling this either).

A balanced budget amendment would diffuse this.  If worthy borrowers require more money then it should be issued as needed.  Under our current central banking scheme it is impossible for the government to balance the budget, if we did, our economy would collapse.  This is a terminal flaw in the system. 

tomaquet said:  As a side point to the main discussion, I think the valid question is: why would we (western economies) want to grow at 9-10%? We know it doesn’t provide more happiness/security/fulfilment and the amount of energy needed would be tremendous (there is very little evidence of de-coupling GDP from energy use). IMO, there are limits to growth (at least calculated by GDP).

Economic growth, through productivity, is something we need to achieve.  Our unemployment rate is too high and increasing every month.  Infrastructure needs rebuilt to build a sustainable society.  We cannot meet these challenges unless we grow our productivity.  I don't understand why a 10% growth in our GDP, or more, should be avoided.  The problem with economic growth under our current system is that we cannot add to our national wealth or infrastructure without adding to our national debt.

tomaquet said:  I personally agree with you on this, but I also accept Lietaer’s experience from within the system at how difficult it would be to change it.

IMHO, major changes are absolutely required if we are ever to have a vibrant economy again.  There is no room for central banks, the Federal Reserve is our greatest financial problem and they must be abolished.  Complimentary currencies accomplish little if the national currency is owned by private banks.  There is no reason for us to have a national debt other than to provide profit for private banks.

Larry

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tomaquet
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Re: The Money Fix

I notice that you have changed your angle of attack from Lietaer to my arguments so I guess we can agree that you and Lietaer are (more or less) on the same side, just that you have different visions of how best to achieve it. Anyway, some clarifications:

DrKrbyLuv wrote:

If the money supply grows along with an increase in products and services, then there will be no inflation.

Agreed - the theory is obviously only valid for a fixed amount of goods and services.

DrKrbyLuv wrote:

I stated several examples of instances where the money supply was heavily increased without inflation.

I agree that the affect might not be as direct as the QTM would suggest but at some point there surely must be an effect. In the examples you gave, it is almost impossible to determine what was the overall supply of goods and services as well as the overall money supply. It is quite likely that because the “normal” money supply (whatever they were using before) was dropping and being replaced by greenbacks, Guernsey bank issued notes, scrips, etc., the total money supply remained fairly level and thus there was no price level increases. Similarly, as the money supply was increased there could well have been an increase in goods and services that matched this increase.

From your post, I get the impression that you expect all increases in the money supply to be matched by an increase in goods and services. Or are you suggesting that the government can create as much money as they want and this would never affect price levels? If you could point me towards some economic theory (neo-classical or heterodox) that could explain this more clearly to me, I’d like to take a look.

DrKrbyLuv wrote:

A balanced budget amendment would diffuse this.

A balanced budget in no way prohibits a govt from creating money. In fact they would likely start creating excessive money so that they could cut taxes or to pay for additional spending.

DrKrbyLuv wrote:

If worthy borrowers require more money then it should be issued as needed.  Under our current central banking scheme it is impossible for the government to balance the budget, if we did, our economy would collapse.  This is a terminal flaw in the system.

Agreed, but I’m not sure how this backs up your argument that a balanced budget would prevent the government from creating as much money it wanted.

DrKrbyLuv wrote:

I don't understand why a 10% growth in our GDP, or more, should be avoided.

As we learnt in Dr Martenson’s crash course, exponential growth is impossible for ever. There are limits based on energy and resource use. Not all growth is beneficial. Once the marginal cost of increasing productivity is greater than the marginal benefit then the economy would do best to stop. It’s difficult to say when this would (or already has) occur but many believe that given the current population we cannot sustain ourselves as we are, let alone increase at 10% a year.

DrKrbyLuv wrote:

We cannot meet these challenges unless we grow our productivity.

I believe we can, we just need to give society the right objectives instead of ploughing money into useless projects or directly to the bankers.

DrKrbyLuv wrote:

The problem with economic growth under our current system is that we cannot add to our national wealth or infrastructure without adding to our national debt.

Rather than viewing how we can increase economic growth (measured by GDP) which is after all the sum total of all goods and services traded, we should use an indicator that actually measures benefits. The current system of GDP measures as benefits that which is spent on cleaning up pollution; money spent on health issues (partly caused by this pollution); the army fighting wars started by lies; money spent on an ever-increasing prisoner population; bailing out fat-cat bankers; etc. However, I agree that it’s absurd that the government has to go into debt to pay for any spending to improve infrastructure when it should have the right to create this money as credit and spend as it likes. It doesn’t mean to say GDP has to grow – just that we have to redirect society’s efforts to what we want.

DrKrbyLuv wrote:

major changes are absolutely required if we are ever to have a vibrant economy again.  There is no room for central banks, the Federal Reserve is our greatest financial problem and they must be abolished. Complimentary currencies accomplish little if the national currency is owned by private banks.

I, and from what I gather from his writings Lietaer, would agree with you that the monetary system needs to changed. The questions are: how do we go about achieving this? and what would we replace it with?
You seem keen to replace it with 100% money which I agree is a good solution, except for the fact that then money creation falls to the responsibility of the government which would also be susceptible to lobbying, and corruption. This is why Lietaer feels overall it would be better to give money/credit creation to the public, whilst simultaneously increasing resilience against (monetary) shocks, increase local spending, and creating stronger community ties (see the online interviews posted before for more details).

If complementary currencies (and other public credit creation facilities mentioned in my previous post) grew to such an extent that private-bank issued money was not as needed then it would be easier to reform the monetary system and “end the fed”.

Anyway, there really aren’t that many differences between you, me and Lietaer and the discourse is spreading into other areas that aren’t directly related to the post. I just wanted to make sure that everyone reading realises that Lietaer is NOT in favour of the current system, nor is an apologist for central banks / fractional reserve system, nor is trying to obfuscate the truth.

T

 

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