A women lives to be a mother: you can detect that from what they care about and deal with (people, people, people …) and how they like being a mother. I respect that. It’s a very important contribution as humanity would die out without mothers; men and all of humanity is only “through the women” (which is also a Bible quote, you know).

However, here is a quite bold statement: for the next several hundred years, the foremost role of women should not be motherhood. Because, there are enough people in the world; so many that actively pursuing a motherhood role is not necessary to keep the world population even above a healthy level of 200 million to 2 billion people.

In addition, I would add that it is disrespectful and selfish to produce new people while the world is not fixed yet to prevent the new people from unnecessarily suffering in this world. New children would be born “for the joy of parenthood” only now, while it would be better to wait until the world is fixed. As it is pure chance what particular child will come out when creating one, people can create the very same people, in a statistical sense, when the world is fixed some hundred years in the future. And until then, just keep society large enough to ensure that it will live on.

This logic is (hopefully …) also acceptible for God; if he indeed wants many people to be created for “populating heaven”. It then just takes a bit longer, but the people will be of “better quality”: a fixed world produced more joyyful, less broken people.

So women need to re-define themselves, take over other tasks! This is a very difficult thing to do, given how focused most women currently are to become mothers.

What exactly was God’s purpose with the Babylonian confusion of tongues? Trying to capture it abstractly, it seems to be this: to prohibit overly synergistic / overly efficient collaboration of people in the future. Because doing this, sinful men would do something against God’s will (like building that central city with its tower instead of filling the Earth) and that something would also harm themselves (actually, dictator Nimrod ruled that city Babylon).

If we put it that generally, the effects are still there today. We have overcome the language problems partially after several thousands of years now, but the deeper problems are still there: people are not able to communicate good enough and to collaborate good enough so that something truly great (or truly terrible, if people had their will) could emerge.

Even the problem of language confusion is just a symptom of a deeper problem: if people had been determined enough, they simply could have set up a research and learning system that is about studying languages, and then could have defined a standard language that everybody would have to learn. But that did not happen, because people’s will to communicate and collaborate was broken. Thanks God, one has to say. But otherwise, if there would be “good” people, they also would lack the ability to communicate and collaborate perfectly now, which renders them unable to do something truly great and powerfully good for this world …

Perhaps you already read about my “power community” vision. One way to grasp it is: it’s avout reversing these communication and collaboration friction loss problems, but on a small scale (like 7-10 people). On a global scale, it would only do harm to reverse these problems, and God will probably keep us from doing that …

I found an interesting quote. I put it here, translated from German by myself:

So, capitalism never works out, because it constantly produces more than can be bought. That it can be maintained that long and produces a relative wealth for a small part of the human population is just because of perusing global differences and because of employing robbery and fraud. But even this wealth has its price and can only be seen as a relative wealth; because, one has to take into account the physical and mental degeneration and dissatisfaction of the wealthy citizens, in contrast to the often happy people of these plundered countries, even though they are often called “poor people”. [source]

Now what does this mean, it always produces more than people can buy? It works like this: the capitalists are those who, for any reason whatsoever, were able to accumulate some money. Now if they would use up that money for consumption, we would not have any problem, but: they do not want to lose that money again, they want it to make more money instead, to live from the interests (they are capitalists after all). So they invest it into companies (or states, which get it from companies by taxes), as this is the only way to “make gain”. Now if companies would spend all that money on their employees which again would spend it all on consumption, there would be no problem again. But the largest part of the money is spent for production technology, which then is used to produce goods for which there are no buyers. Because the employees did not get much …
In short: capitalism dies from deflation in the consumer class. Because too much money went into creating production facilties as a way to make more gain, neglecting that by cutting employee wages, they will (on large scale) lack the ability to consume. Making the production facilities run idle.

And shorter: capitalism dies because investing in production facilities is a bubble.

Addition: if we define consumption as an “irrevocable assignment of money to material goods”, then creating production facilities is of course production, too. But, if people cannot afford the goods, it is a form of consumption that does not increase the wealth in society, a useless assignement of money. Races around the moon would be just as useless.

Of course one could also argue that, if there is more supply than demand, then the prices will fall. Which would solve the problem if the capitalists would do that by waiving a part of their gain; but they always try to do it first by cutting employee wages. Which then reinforces the whole problem (on society scale).

After all, this leads to the following insight: an economy is healthy only the price sum of all consumer products produced and the sum of all employee wages is the same! Which is an objetive indicator for how much work time is worth: as much as needed to buy everything that is produced. The problem is, it seems that this condition will leave no gain at all to be made by capital investment! If somebody saved up capital, he or she might invest it as a tool (“lever”: allows to do move bigger things), but can not expect to make gain with the capital, but by using his / her own work time. The hourly wages of course can differ, and can make up the lack of capital interest (at least partially).

So as a solution, we would need this (and only this) element of a controlled economy: nobody is allowed to increase production capabilities (like founding another company, or optimizing current capabilities) if the wage sum of the whole society does not allow the society members to buy all the expected new products. This will make capitalists increase the wages of their employees to get allowed to found new enterprises. And that way, the employees get a fair share of the capitalists’ income (where fair means, enough to buy what gets produced).

I wonder if “Be fruitful and increase in number” (Gen 1:28) is meant as an command to individual persons or to humankind as a whole. I would rather say, to humankind as a whole, because God adds, in typical Judaic parallelism, the same content verbalized as: “fill the earth and subdue it” (Gen 1:28).

So it seems the command is not for everybody to have children, but for humankind to fill the Earth. And there are plenty of tasks to do that are not about having children oneself, and that contribute to humankind filling and ruling (in a positive way) the Earth: caring for orphans, caring for children medically (so that they do not die), caring for adults medically and mentally (so that they can have and educate healthy children) etc..

How about this: to counter conditions like in Iraq and Afghanistan, one should re-invent the historic practice of razing (tearing down) whole cities, and extend this if necessary also to whole countries, but all in humanitarian acceptable manner. For example, one could tear down Bagdad, and distribute the 5 million people to all the other countries of the world.

And how about this (even better): War (as in, all violent conflicts) is always a conflict of interest, and in nearly all cases there are people who actively want to fight that war, and those who do not but are harmed by the war. Those who are harmed would want to emigrate to asylum; and by providing an easily accessible option for such permanent asylum, one solves the problem of war. Because what’s left are people who want to be in the war, and may they do so, as they do not want any help. So what’s needed is a state with the sole task to provide permanent asylum, in the sense of finding a new home. That state would actively search for new people to take in, and extract them from their current conflict zones by all means. The people would then be educated to take part in their new state, including learning English as their new language, learning a new profession etc.. That new state would be a resource-oriented economy, kind of a planned economy in the digital age, also including digitized peer-observation to counter corruption. What’s still needed is a place for that state; any place would do, including a part of the Sahara, a specially licenced ground from another state (“temporary state” on foreign ground) etc..

A basic insight has to be this: war is the most explicit way to destroy resources (wealth). (Entertainment is another way, but we discuss war here.) Because in war, both parties try to harm (destroy) each other, and protect themselves from this artificial (man made, not nature made) harm produced by the other party. The most idiotic war of course is the war for economc resources: it is destroying resources to gain resources.

Ok, so maybe wanting to found ones own state is somewhat far off. But then, at least I want the state to let me live the way I want to. Which means, it must be a minimal state: caring for outer (military) and inner (police) security, and perhaps caring to prohibit corporate monopolies. And, because much freedom must be granted to inhabitants, the state has to severely limit the number of its inhabitants. Also, the state should build infrastructure, but only what people cannot build themselves: streets, bridges, phone and Internet lines, tubes for an automated logistics system. And that is it.

I do not want the state to: regulate where I am allowed to build what; that and how I must do health insurance; what to do on the street; how to build a vehicle; what to write on a website; if I am allowed to have a weapon; etc..
As a minimal state would not have the government to collect taxes, it should perform its tasks rather by people doing state service for a time.

It is however true that a minimal state cannot be a welfare state at the same time; except if granting an unconditinal basic income while still  staying away from regulating other areas of life.

In addition to the minimal state, we need of course other instiutions to care for disadvantaged people etc.. But these would be totally decentralized (like intentional commuities), so not granting the state additional mandatory power over peoples lives as in a central welfare state.

See:

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.