Lately, I was engaged in a major discussion (thanks, uncle 😉 ) about the inner workings of the money and economic system. It was not really clear where the money to pay interest comes from … so now I invested some hours and found out about it. Here is a collection of various results.

Modern Money Mechanics

There is a great document titled “Modern Money Mechanics“, issued by the U.S. Federal Reserve Bank. It shows in good clarity the system of fiat money / fractional reserve banking. Here are some important insights from that, and based on that:

  • ”Assuming a constant rate of use, if the volume of money grows more rapidly than the rate at which the output of real goods and services increases, prices will rise. This will happen because there will be more money than there will be goods and services to spend it on at prevailing prices.” (p. 3) This states that it is necessary to increase the money base (M1) in the same rate as the economic output rises, to keep prices stable. (Note that economic output is not the same as GDP, as the GDP already may include price changes that as the effect of teh above mechanism; GDP cleared from inflation would be the way to measure economic output.)
  • “Changes in the quantity of money may originate with actions of the Federal Reserve System (the central bank), depository institutions (principally commercial banks), or the public.” (p. 3)
  • It was a small step from printing notes to making book entries crediting deposits of borrowers, which the borrowers in turn could “spend” by writing checks, thereby “printing” their own money.” (p. 3) And if individuals would act just as banks do, they would issue way more checks than they own deposits on their bank, trusting that only a limited number of checks would be converted to cash at any given time, while the rest would be used as means of payment much like currency.
  • In the fiat money system, banks could create money infinitely; this is limited just by the necessity that money must be trusted by the population or they would not use it. That is, it must maintain scarcity in relation to its usefulness (which is a verbalization for “value”, used in “Modern Money Mechanics”).
  • In a fractional reserve fiat money system that requires 10% minimum deposit at the reserve bank, every piece of money you deposit on your account is worth ninefold as much to the bank!!! Because it is allowed to, and will, create the ninefold amount of loans from that, keeping your money as the reserve 10%. So if you deposit 1000 EUR, it’s worth 9000 to the bank to work with.
  • Why do banks want people to never withdraw large amounts of currency, or carry large amounts of currency in their pockets, and rather pay with credit cards etc.? Because currency counts as reserve money, so has much higher value to the bank than to the customer. See: “A bank can always obtain reserve balances by sending currency to its Reserve Bank and can obtain currency by drawing on its reserve balance.” (p. 5).
  • “When deposits, which are fractional reserve money, are exchanged for currency, which is 100 percent reserve money, the banking system experiences a net reserve drain. Under the assumed 10 percent reserve requirement, a given amount of bank reserves can support deposits ten times as great, but when drawn upon to meet currency demand, the exchange is one to one.” (p. 18)
  • Now if deposits of their customers are of such a much higher value to the banks than to the customers (ninefold, in Europe), why do customers still get a crappy interest rate, even much lower than the onefold interest rate on loans people get from this deposited money times? Truly banks are the champs of capitalism. And, they even don’t tell customers what they do with their money … making loans from the the ninefold amount of it!
  • The reserve bank’s base rate of interest is the rate it charges other banks if these lend reserves. Yes really. Banks not only are allowed to create money by multiplying reserves, they are also allowed to lend the reserves to do this. Normally the base rate is the limiting factor to this, but in tough times, this rate can be 0%. (As done by the EZB during the 2008-2010 economy crisis.) A 0% base rate effectively allows the creation of unlimited money …
  • Central bank money is not money, according to “Modern Money Mechanics”. It is virtually destroyed until re-issued by the central bank. See the definition of M1 in “Modern Money Mechanics”. This means that central bank money makes noone any richer as long as it is owned by the central bank.
  • The increase of deposit money by means of the reserve multiplier in a fractional reserve banking system is the only way how deposit money increases; and deposit money is the same as “book money” (German “Buchgeld”), so this  is the way that Buchgeld increases. (And not some strange, often quoted re-lending of loans).
  • In the Eurozone, the fractional reserve is 2%, that is the resever multiplier is 50! That is, each currency euro is worth 50 euro for the bank …
  • Currency is central bank money. It is (logically) only created once when introdcing a currency, by handing everybody a free “start package”, or converting from previous currency.
  • Money as deposit money (that is, 97% of M1 in the U.S.) loses its trustworthiness if a good part of it was created with faulty securities, that is, no value that does back it. As this is the case currently, these subprime credits do not only endanger the borrowers themselves but also all people’s money because money itself is endangered. This danger becomes apparent in bank foreclosures; and takes effect if there are more foreclosures than the foreclosure insurance does protect people from. And if / as the whole bank system is full of faulty credits, the full deposit money system is endangered.

Is all money debt?

One way where the additional money to pay interest rates could come from would be, from new debt. This would be clearly the case if all money would be debt (where debt means, a liability with a non-zero interest rate). Let’s see:

In the U.S., at least all deposit money (that is, book money) is issued in exchange for debt:

Federal Reserve Governor Marriner Eccles testified before the House Committee on Banking and Currency, September 30, 1941. Congressman Wright Patman asked Eccles how the fed got the money to purchase two billion dollars worth of government bonds in 1933. Eccles answered, “We created it.” Patman asked, “Out of what?” Eccles replied, “Out of the right to issue credit money.” Patman queried, “And there is nothing behind it, is there, except our government’s credit?” Eccles responded, “That is what our money system is. If there were no debts in our money system, there wouldn’t be any money.” [source; a more reliable source would be great]

In Europe, currency is not debt but an asset: because the mean fractional reserve of central bank money is stored in the central bank accounts, and banks get paid interest for that  [source] rather than the other way round. While they pay interest if they lend money from the central bank [source]. (The first kind of interest increases the money base (money creation), the second decreases it (money destruction); while the loan capital flow has the opposite effect.)

So, in both the U.S. and Europe, all deposit money is created from debt [source]. Central bank deposit money can be converted to currency 1:1. And sometimes central bank money is lended out for 0% interest. Still, this does not mean that customers could acquire new money that is not debt, as they can acquire newly created (deposit) money only through normal banks, which always charge an interest. So in effect, there have to be additional debts for successful payback of all interests. Successful repayment of all debts increases the money supply (M1), so necessarily increases the debt, as debt is needed as the counterpart to issue new deposit money.

However: the amount of new money (so, the amount of new debt), after being cleared from the debt destroyed in depressions and great depressions, seems to be a representation of the increased efficiency of economy [source: “On fractional reserve banking”, section “World destruction”]. This produces the paradox situation that increased economic efficiency (which is a good thing)  leads to a larger and larger debt load through interest (which is a bad thing). It is bad, because this debt load has to be managed. Over time, an economy becomes more and more unstable and crisis prone this way. What could be done against this problem?

Means against the debt trap

Note that this section contains mostly my own proposals.

  1. Inflation. Inflation (as measured by rising prices) is a devaluation of debt. Inflation as such is actually a number not saying much. If the price of an average small car between one year and the next stays constant, but the new model includes technical improvements (as they always do), this is actually deflation (because the same amount of money can buy more now)! In this sense, to get stable prices, we need inflation rates that are equivalent to the efficiency gain rates / technological improvement rates of the economy. This whole thing is not mentioned by people comparing the purchasing power of money from before 50 years or so with the current one. So, if the inflation rate would be exactly as high as the rate at which the money supply increases through new debt, the net worth of all debts would be unchanged and remain manageable. Currently however, interest rates (the rate at which debt increases) are normally higher than inflation rates, which means aggregation of debt until it becomes unmanageable. But when always letting the inflation rate be as high as the interest rate; or in other words, the debt would stay manageable. This keeps the economy stable, but might have disadvantages in that it discourages research to improve efficiency, as higher inflation will shorten the benefits gained through efficiency increases (though there are always benefits in relation to competitors, but not in respect to the rest of economy, that is, to purchasing power of earned money).
  2. Good crashes. Crashes large and small will and need to come whenever there is a disparity between expectation of interest and producable interest by technological advancement or current gain ratio. That is, crashes do cure greed. There are many small crashes like losing money on the stock market; but if small crashes are saved up by government means like bail outs etc., they aggregate to larger and larger crashes, ranging from economic crisis to state bankrupty to world bankruptcy. Which would mean just the devaluation of all currencies because they got untrustworthy, that is the need to replace them with others. So, people: Don’t save up the crashes. If you do, it is like saving the blows earned for greed, until they all break lose in a fury that is nothing less than a beating to death. Instead, undergo the small crashes as they come, and learn from them. They will come until you have learned to not expect more interest than there is technological gain in efficiency. We should see them as necessary and good things, and develop ways to let them happen in less panic prone ways (smaller crashes, but more often; or better liquidation procedures even for large banks, states etc.; or “continuous crashing” procedures). Because, what is a crash if not the destruction of too high expectations of interest by investors, when it becomes apparent that these expectations were too high. See: “Even so, if we were to act rationally, interest would still compound at a steady and slower rate, it would still be cumulative though, if inflation can not in the end destroy enough value something else has to, a crash.” [source]
  3. Limiting interest rates. On average, all interest expectations that exceed the gain in technology and organizational efficiency are too high. So another idea against economic unstability would be to prohibit interest rates that exceed the gain of efficiency in a company or organization or even a state (that takes loans). In the latter case, citizen investors would have a motivation to strive for efficient usage of their invested money! The only thing that produces value is gain in technological efficiency, by technological aggregation of knowledge and experience (for efficient procedures) and aggregation of infrastructure (for efficient execution of processes). Both would have to be factored in to calculate the maximum allowable interest rate (as everythig else leads to a crash in time). Note that GDP increase is not the same as efficiency gain, as the technological improvements (causing deflation) are registered nowhere. Interest rates might be somewhat to the limit of this efficiency gain (or rather, to the limit of half that value, to allow the company itself to earn also from that gain). Being near to that limit motivates to keep up efficiency development, and even to improve that speed if possible; but it does not beat people along in enormous, unbearble stress like in the current economy, where one has to pay a 9% interest rate on average even though the overall efficiency gain is perhaps 3% (rough estimate). (Note that a 3% increase seems small, but can produce uninterrupted exponential results, so after 20 years: (1+0.03)^20=19.24.)
  4. Free banking. Another solution would be free banking. Where a bank would be simply: an institution emitting a resource of sufficient scarcity and trustability to have value, in exchange for deposits of other resources that have value. The emitted resource would be the money of that bank. For example, one kind of money might be gold standard based and extremely trustable, another might be fractional reserve based and less trustable but better investable. Fiat money as such is not much of a problem resp. would work well if banks are trustable, self-supporting institutions (not the faible, weak, breakable things they are now). Then, banks would be the required trustable third parties for trustable value exchange and storage, and earn for this service, and not from speculative lending.
  5. Adjusting the reserve multiplier. Fiat money is monetary value in exchange for binding value by means of rights to things [source] or rights to currency [source]. So a bank simply brings such other forms of value into a more liquid form, which would be ok to do. What is not ok, and makes the economy unstable, is that banks accept faulty securities, for example the hopes of companies to make money. And they do so simply because they want to lend out all their money, as this is their way to earn money. So as a solution, the reserve multiplier would have to be lowered until banks do no longer grant risky loans because they have just enough money to grant secure loans.
  6. Less liquidity. “Die Steuerung der Geldschöpfung obliegt heutzutage fast ausschließlich den Geschäftsbanken, da die Zentralbanken im Sinne einer ausreichenden Geldversorgung der Realwirtschaft (die fast ausschließlich von den Geschäftsbanken gewährt wird) den Geschäftsbanken jederzeit ausreichend Zentralbank- und Bargeld zur Verfügung stellen.” [source]. Which means nothing else than that central banks produce all money that banks want. Money is only still a non-scarce resource (i.e. a valuable thing) because it can be obtained from banks only when paying an added interest. Now both creditors and debitors are greedy, ready to take a loan with an attached interest in the hope that the credit can be paid back: this way, greed can jump in as motivation, using excess liquidity for granting risky loans in the hope to earn still more than currently. And this speculation of banks and bank customers is what then leads to crashes. With less liquidity, economy might develop slower, but more constantly: without crashes that would destroy too fast development anyway. So the central banks should lower liquidity!
  7. Keynesian politics to control also the boom. Limiting the speculative granting of risky credits, which takes place in economic booms, is an important factor in economic politics: “The problem for the world economy is that everybody remembered Keynes’s lesson about the need for countercyclical policies only when the crisis erupted, after demanding to be left alone – with no symmetric policy intervention – during the preceding boom. But managing the boom is more important, because it addresses what causes crises in the first place.” [source]
  8. Demanding better securities. Another bad thing is that it seems that high interest rates are necessary in market economy, to secure the bank against the risk of credit defaults. In market economy there is no central resource planning, so that every participant needs to do resource planning on his / her own, which is necessarily speculative: one tries to do something that will create gain, but cannot know whether this does work or not as customers can only buy after the product is there. This speculative investing is risky, potenially resulting in a small crash; and this leads banks to use high interest rates to still earn money. These high interest rates in tun make investing by loans still more risky, and create still more stress on the economy. There are simply not enough secure loans to grant in a market economy, as market economy is inherently speculative; or, if banks would only grant secure loans, they would earn just a little bit, which lures them to grant sub prime loans as well. So the problem of economic instability might be, at least in part, the inherently speculative nature of the market economy.
    Stopping to grant risky loans also would increase unemployment; because many people currently are employed in companies based on risky loans, hoping to make net gain in the future. In this sense, if we want to keep market economy, we need to keep a good part of risk.
  9. Planned economy. If speculative risk (and therefore, st least small crashes) is such an integral part of market economy, I want to propose a planned economy where people can freely form cooperatives to order the development or production of something. Governance is possible by electronic means like web portals. There would be no risk (of overproduction, or producing things that nobody wants) because everything is built and developed to order, from food to cars to tools etc.. Another good side effect would be that customers can again get the quality they want.

All stress in this economy is credit-induced through interest rates, and because the banks and companies are stock companies, induced by our own greed for money through stocks. We are our own slave masters! (Poor workers are pure slaves, and rich rentiers are pure slave masters, but the average citizen is both.) We do stress ourselves for no reason, and this even does lead to a crash afterwards, in addition to all the workplace stress!!!

Result

The thesis that the existence of interest itself does lead to a crash by a chain letter system is too simplistic. Instead, too high interest rates do, but simply by being unrealistic expectations.

I found what really brings the world forward: perseverance resp. aggregation. This can be aggregation of knowledge, of tools etc.. Everything large or powerful is something aggregated that has been developed in many years. The whole technological culture of humanity is actually something that was aggregated over thousands of years.

Aggregation is actually much more important then ingenuity; or even, ingenuity is in many cases the result of unhindered intellectual aggregation, in the sense of being something acquired by people who have the desire and possibilities to always learn something new in a certain area.

So for a society it is much more important to create infrastructure etc. taht fosters unhindered aggregation (which includes collaboration, synergy etc.), than to invest in supporting the “highly gifted” people. The same applies to personal life: there are only very few occasions where an ingenious idea or even a decision makes a big difference; the most part is work, and work is only fruitful if teh results can aggregate to something good for one personally.

I think it’s irresponsible to be fond of children because they’re light-hearted and unburdened.

Yea really; if people feel the adult world as a burden, but don’t fix that world, instead glorify childhood until their children grow up and suffer from that same world.

A paid day job makes me feel like a bee: they take away what I have been working for, and give me a cheap surrogate. They take the honey and give me money …

I mean, really: the most rewarding thing of work is to experience the personal, immediate benefit effectuated by the work done. Such as simplifying a task with a self-made tool. Or feeling the personal success, reward and gratitude after having saved someones life. But if they give us money, that totally annulls this effect, because money is an indirection step. Even worse, earned money does not keep its identity, but aggregates with previously earned money to a lump that we then expend without knowing what kind of work is in it …

The most obvious drawback of this alienation by being paid money is ones motivation to work, and ones motivation to reach good results. Paid work is often even work for people I do not know (such as the users of the products I might develop or produce), which means I cannot derive motivation from my later personal gain from the product, and hence will not have the motivation to get the product as good as possible. Instead, I might just have the motivation to get as much money as possible, while minimizing my effort for the product. This is a de-coupling effect between the real thing and its representation in money; such a de-coupling step is possible wherever an indirection is introduced.

Worst, this indirection step was institutionalized: it’s called capitalism.

On persons as systems

What’s really interesting, and I am not aware of anybody who has researched into it, is how do people work as personalities from a systems perspective? Every person can be seen as a psychodynamic system; to maintain proper operation, motivation, enjoyment, relaxation etc. are needed and have to come from some source. Now it will be interesting to see the very different ways how people provide these, and become a working (or non-working) system, within their own environment. This is especialy helpful to understand cultural differences.

And in the same way, open source projects are sociodynamic / psychodynamic systems. And even societies are. Failure arises if these systems cannot maintain their own integrity and stop working properly: open source projects die, societies falter.

So there should be a discipline “social engineering” and “personality engineering” that helps structure people and groups so that they can be working systems. It seems that nobody attempted that yet (on society level, they just focus on money … what a poor abstraction).

On personal disintegration

While we are at this topic, there is another aspect: avoiding personal disintegration. One should take care to keep up ones personality as a system, to keep it from falling apart, that is, disintegration. Because, disintegrated persons are no longer able to live on their own; they are also unable to learn living on their own again; instead, they need “professional help”. A disintegrated person is what is commonly understood as a “broken personality”. Someone who stopped working as a self-supporting system.

There are many “disintegrating forces” in life. Stress, the lack of relaxation times, the expectations of others, substance dependence, other dependences, unhealthy nutrition, lack of fitness, … . The result of disintegration is normally no physical issue, at least not alone. Physical issues like lack of fitness, bad nutrition etc. can contribute, but more important are the mind issues to which these physical issues contribute: lack of motivation, depression, inability to enjoy, lack of visionary goals, feeling a lack of meaning in life etc..

On free will

People still discuss if people have a free will or not. Here is a new approach: the free will might be nothing that has a biological foundation (biology might even hinder it), but free will might be nonetheless present, “purely in software”, that is, in learned brain function. In that respect, the concept of “personhood” might be correct simply because others expect people to behave as persons, and they learn to fulfill these expectations (they learn to behave as persons: being responsible, having a conscience, having a free will). That way, personhood would be a social construct. (Just as free will, so also responsibility, so also moral debt, which are entailed in the concept of personhood.)

You might have realized my increased interest in resilient communities and all the autarkic technology that they need. Why is this? Of course it is a viable (any my personal) answer to the current financial crisis and generally to the dangers of globalization. But it is also more. Here is a wild and quite unordered list of reasons why I like the “autarkic resilient community” idea:

  • Earning bread, not money. Autarky is about, I want to earn my own bread, not money. That’s the most free style of working, when you create what you need, being neither dependent on others for creating nor consuming. With money, you depend on others for that both.
  • Leaving personal exploitation. It is also my personal way and tool to get out of exploitable dependencies. Totally out. It is the hard-hitting, full-scale, quite extreme solution to that problem. After I met with exploitation in various ways in my few years of adult experience, I do no longer want anybody to do anything like that to me. In effect this means, I do not want anybody “above” or “below” in any kind of hierarchy, as all these relationships can draw resources to the degree of exploitation. The “theoretical optimum” would be personal autarky, with the ability to help all the people around (which would also meet ones social needs). However, this is technically impossible, and still quite lonely: the feeling of being cared for is actually also a good experience. So interdependence is o.k. and desirable, where this means peer-to-peer relationships where no partner can (or will) exploit the other. Like the people within one resilient community, who are able to trust each other. And also like multiple resilient communities, supporting each other, but being fully able to immediately stand on their own if there is the need for it.
    I must admit that this solution to cope with unrighteousness (esp. exploitation, see above) is not really a solution: it is just avoiding to meet with unrighteousness. This is because I see no meaning in coping with or fighting unrighteousness, because it should simply not exist. Being able to successfully fight against unrighteousness is a qualification one would not need in the “ideal world”, so there is better stuff to learn. But that is my view of things. Also, I still think that one should be able to clearly communicate to people that what they do is unrighteous, so that they have a chance to repent and undo what they did; but investing more energy and resources to actually fight back is beyond what I think is meaningful. Instead of that, I better want to invest my energy and resources into developing a parallel, resilient “new world”, where righteousness lives. (To be clear: this is not blasphemy, it is irony. Righteousness lives with God in Heaven alone, but in a very limited sense one could apply it to resilient communities that are able to exclude unrighteousness by reorganizing themselves, through resilience.)
  • A give-based society. This is another personal reason for this autarky thing: I tried to live “according to the moral standards of the New Testament” in my life up to now, which is in essence: to love your neighbor as you love yourself. But it did not work out: “the system” exploited my graciousness, just as people exploit the grace of God. Because “the system” is all about taking, while NT is all about giving; both systems work (and the NT system is much more pleasure to live in), but not if they do mix with each other (then the NT part is worst of all). Which means, God has to find a place for me now … as I still hate the “taking-based system” of capital / wealth / rights aggregation in economic and personal life, and love the “NT system”, the NT standard of love, but find it impossible to live it out in a world of exploitation and hard, exploiting competition. I think the autarkic community thing can be that kind of place for me.
  • Exploitation-free society. I do not exploit, so I do not want to be exploited. It’s akin to anarchism. As people and institutions are unwilling to respect that, I will move out of all their systems. That’s the background of autarkic communities. Among the expolitation-prone relationships to replace are: institutionalized health insurance; the whole “free market economy” thing where every contract is basically exploitable by the other party; large nation states with all their inefficiency and very limited participation options in parliamentary democracy; intellectual property industries; landlords; commercial products; and so on, and so on.
  • The philantropic component. Ah, and yet another thing. Though I have to admit a deep frustration about the “state of the world” and esp. about the business world, and though I seek total independence from peple now, my philantropic, visionary strain did not vanish. This autarky project is not just about autarky for myself, but at the same time about inventing and providing the necessary tools to everybody, so that people can start their own autarky from scratch.
  • A Robinsonade. Still another thing: It is quite interesting that my enthusiasm about autarky started already in my childhood, me writing the story “Primitive Lage” (primitive state) at the age of 12-14 (?), which was kind of a Robinsonade.
  • Against the moral dilemma of inhumane globalized production. And again, another reason: autarky solves the moral dilemma of globalization, namely, that it is not meaningfully possible (except perhaps for the rich) to not buy all the products that have been produced in inhumane conditions somewhere overseas.
  • Ad-free society. And still another advantage: in autarky-based economy, advertisement is unnecessary. Which will add to the efficiency and profitability of this mode of economy, as advertising is simply waste of resources (time, money, energy … everything). Because it is a pull-based economy: people search for the design they need, and then produce it themselves.
  • On not needing large systems. Autarky-based economy and autarky-based society is the discovery that any large-scale system (political, economic, technical) is unnecessary. Which introduces simplicity, as all these large-scale systems are unmanageable, or nearly that, and a good percentage of the population is busy with steering them (using statistics, controlling, business administration, politics and the like). People in the autarky movement have the right to be no longer interested in steering large-scale systems, and to not search for solutions to their problems (“the global problems”).
  • Solving over-population. In autarky-based society, there is not even a problem of global over-population, because of the following emergence: an autarky community will take care to get no bigger in numbers than the amount of people it can feed sustainably (and also in times of crop failure).
  • It’s about small-scale socialism. Autarky-based communities are actually socialism. But small-scale, and that makes the difference. Large-scale socialism cannot work because there is a large free rider and inefficiency problem: large systems are hierarchical, and those higher in hierarchy can always be free riders, as those below have no influence options and also there are no market forces that hinder managers from being too much of a free rider. In small-scale socialism however, every inefficiency and free riding hurts everybody, and as there is no need for hierarchy, there can be effective governance to tackle inefficiency and free riding.
  • It’s Marx minus utopies. The Marxist interpretation of this new autarky movement would probably be that the means of production are now returned to the hands of the people. But contrary to Marx, whose image of humanity was flawed by optimistic utopism, the autarky movement includes precautions to be resilient against the inherent evil of the human being: the means of production are not returned “to the people” as a whole, but to small communities who use them only for themselves (with very limited external trade). Without a central market and central governance, there can be no centralized exploitation (as in real socialism), autarky communities can only fall one at a time. There is no point in using the means of production in any centralized (large scale) way, as this just elicits centralism and centralized exploitation again.
  • Against institutionalized politics. The governance of an autarky community is the governance of a small-scale society: one needs to employ principles learned in friendships, marriage, partnerships, tribes and villages; not those form any kind of larger society where any degree of anonymity exists. Because the examples of small-scale societies mentioned before can be stable, by our experience, so can be the autarky community. And yet: autarkic communities (at least the ones with software governance) are the grassroots approach to pose an end to the system of “politics”. Where the definition of politics is that it is about power: about getting ones chosen way done, not about choosing the right or best way. Only in small-scale entities, where problems are small-scale and therefore understandable and solvable, opinions and therefore politics can be avoided. So it should be done in these small-scale autarkic communities.
  • A mistrust against centralized systems. Main reason for establishing an autarkic community is because I do not trust any centralized systemt to be able to create and maintain adequate living conditions for people.
  • Liberal or social? By the way, is the concept of autarkic communities a (neo-)liberalist or a socialist idea? None of it, and both of it. It is totally liberalist regarding its relation to the state, by not needing the state for anything any more (dear state, if you read this: this does not mean that I intend to do anything against the state; it’s just not needed). And it is totally socialist regarding its inner relations, by needing the other members of the community for everything, by implementing “small-scale communism” within such a group. It seems that the sum of liberalism and socialism in any culture has to be the same for the culture to work; but the distribution can be chosen. So either the “public society” can be mainly socialist, allowing the “private life” to be liberalist / individualistic. Or vice versa (as in the case of autarkic communities). Or a mixed variants in various degrees (as in the case of most Western societies).
  • Biblical support? By forcing things a little, one can even find Biblical support for the autarky / autarkic community idea:  Rom 13:8; I Thess 4:10-12; Acts 2:44-45.
  • Easier to build and maintain than a state. More reasons why to prefer the autarkic lawless system to the large-state law system: it needs less effort to build, while it needs a large movement to change a state, and a large movement to keep it in order, means one community cannot guarantee it. Whenever you cannot maintain or uphold something, you need to let it down because it is a waste of resources. Means you need to let down society with all its problems and questions to go managing the small community, which is manageable.
  • It’s simpler in small societies. Things that will no longer be necessary when moving to autarky-based economy include: Customs duty, and all entailed administration. Because autarkic economy has the intrinsic motivation to not buy essential goods, there is no danger to come into unhealthy dependencies by trade (which just adds luxury items), so trade needs not be regulated.
  • Work as fun and fulfilling. It is true (esp. in the first time) that there is much less luxury and leisure time in an autarkic community. There would be also no commercial entertainment available like videos and music (apart from the vast amount of cost-free stuff on the Internet). And also, people will have to work more. All this is no problem, however, as work is fun and meaningful and fulfilling now. There is simply no need for entertainment, leisure time and luxury if people like their work, think it is meaningful and have enough social fun in an unstressed working condition as to not need leisure time or entertainment. People will value their work to be meaningful because they do create the essential things for themselves, and help the world to do the same – while work for luxury and pseudo-products (like McDonalds food …) is not meaningful because it is avoidable.
    If you want a book to look up more on this: Jerry Mander (Ed.), Edward Goldsmith (Ed.): The Case Against the Global Economy: And for a Turn Toward the Local [here on Amazon]. There is also an excerpt chapter on Indian local economy (swadeshi).
  • The right to use ones full potential. In my view, the “right to use ones full potential, for the good of oneself and of all” should be a fundamental right in society. But it is not, because the unemployed people are not allowed to use their full potential, as no corresponding counter-value is offered to them (by means of a job, or other means) that would allow them to use their potential for the good of theirselves. They could, however, use their potential for volunteering, for the good of all; but a part of the fundamental right proposed above is also to use ones potential for oneself. Because if volunteering is the only option, it is not voluntary, it is collective slavery.
    Now there is no such right in Germany: GG Art. 2 (1) allows to use ones full potential if it does not hurt the “rights of others”, and others have the right to not offer somebody a job – which is the problem of the unemployed. GG Art. 12 (1) allows to choose ones job freely; but does not guarantee the option to choose.
    GG Art. 2 (1): Jeder hat das Recht auf die freie Entfaltung seiner Persönlichkeit, soweit er nicht die Rechte anderer verletzt und nicht gegen die verfassungsmäßige Ordnung oder das Sittengesetz verstößt.
    GG Art. 12 (1): Alle Deutschen haben das Recht, Beruf, Arbeitsplatz und Ausbildungsstätte frei zu wählen.
    Now, what would an autarkic community improve here: by being autarkic (independent of the job market), it allows everybody to use his / her potential, for the good of theirselves and others. Society should at least guarantee to found autarkic communities for the unemployed, so that they can use their time and power to their potential. There are “education” and “occupation” programs for the unemployed, but these are currently just “1 EUR jobs”, which is far from a counter-value for using the “full potential” of time and power.
  • Replacing bad rules. This society has “bad rules”, so I do not want to get socialized into it, instead I want to found my own. The bad rules are the excessive protection of properties by the forces of the state: while the rich get richer, the poor not even get something to help themselves out of being poor. They get subsistence fees. But let’s not miss the exceptions where the state indeed tries to help people realize their full potential, like the EXIST program.
  • The advantage of deliberate societies. Autarkic societies are about deliberate societies: the thesis is that a society that can select its members will work better than one that needs to include everybody just because he / she got born there. This is not about elitism, but about being able to abandon people who do not obey the “social contract” of a society.
  • Eliminating resource conversion friction loss. Also, autarkic community is about eliminating the huge amount of loss (“friction loss”) that happens both when converting personal resources (knowledge, qualifications, tools and time) into money, and money back into personal resources (products and services obtained). This loss is due to many reasons: the state captures near 50% of resources in one full such cycle; there is maximized commercial gain of the supplier parties involved; one might not be happy enough to have customers whi pay good in timely fashion, or even can pay good; and one might not even be happy enough to be able to convert ones resources to money at all (called unemployment, which is a problem in the socioeconomic system, not a necessity of the physical world). In addition, the rich and powerful people succeed to make this system work at a surplus for them, even increasing the loss that the other contributors have to bear in this resource-to-money-and-back cycle, and leading to unhealthy concentrations of power and money.
  • Post-scarcity economics. When it comes to autarkic / sovereign / resilient communities, people often talk about “post scarcity” economy. This does not mean to exploit nature (or fellow humans) even more so that one personally has no scarcity any longer; as this is what people try nowadays, and it creates all sorts of wars and problems. Post-scarcity is about adapting ones choice and use of resources so that the supply is abundant relative to ones use. Then, people can stop fighting against nature and fellow creatures, because there is nothing any more to struggle about. The choice of resources to use would then include all the abundant and the renewable resources of nature: water, air, soil (silicium), aluminium, sun energy, wind, wood, … . Behind the open design idea is the conviction that humanity is depraved of much potential well-being because institutions keep back their designs as secrets, instead of publishing them for all to see and use. read more on that “scarcity economics” background of capitalism.