Power of Story
Send a Tweet        
- Advertisement -

Share on Google Plus Share on Twitter Share on Facebook 3 Share on LinkedIn Share on PInterest Share on Fark! Share on Reddit Share on StumbleUpon Tell A Friend 3 (6 Shares)  

Printer Friendly Page Save As Favorite View Favorites (# of views)   6 comments
Exclusive to OpEdNews:
OpEdNews Op Eds

In the future there will be no interest on money

By       Message Bart Klein Ikink     Permalink
      (Page 13 of 15 pages) Become a premium member to see this article and all articles as one long page.
Related Topic(s): ; ; ; ; ; , Add Tags Add to My Group(s)

Valuable 2   Must Read 1   Well Said 1  
View Ratings | Rate It

opednews.com Headlined to H4 9/27/13

- Advertisement -

Steady state economics and de-growth

The degrowth movement is based on ecological economics and anti-consumerist and anti-capitalist ideas. It advocates for the downscaling of production and consumption, arguing that over consumption lies at the root of long term environmental issues and social inequalities [26]. The development of steady state economics is a response to the observation that economic growth has limits, given its consequences such as climate disruption, widespread habitat loss and species extinction, consumption of natural resources, pollution, urban congestion and an intensifying competition for remaining resources [27].

The main driver of unsustainable economic growth is interest on money. The hidden consequence of interest is that people tend to prefer being rich now to surviving the future. This is similar to preferring 20,000 loafs of bread today above one loaf of bread every day the next 20,000 days. A negative nominal interest rate will discount future income at a higher price while a positive nominal interest rate will discount future income at a lower price. As exponential growth cannot be sustained, negative real interest rates on money may be needed in the future. This is feasible with a demurrage on the currency.


- Advertisement -

The views of the different economic schools have all merits but solid evidence supporting their views is hard to come by. In a real world economy different issues are at play at the same time. For example, economist Paul Krugman criticised predictions of high inflation made by Austrians in 2011 by stating that the monetary base had tripled without causing a rise in inflation rates [23]. Other factors may have been at work, such as price competition from low wage countries, credit contraction and questionable inflation statistics. In the long run an increase in the monetary base must be inflationary [17].

In economics political agendas may be hidden in the assumptions. Keynesians and monetarists have a vested interest in interventions by governments and central banks. Keynesian economics and monetarism have enjoyed a considerable success because they both propose measures to counteract the effects of compound interest. Those methods have worked in the past. That is the reason why deficit spending and monetary expansion are still very popular with policy makers.

The moral hazard and the inefficient allocation of capital that result from anticipated interventions by governments and central banks seem a lesser evil compared to economic depressions. As a consequence many countries have become dependent on easy credit. At some point their currencies may fall out of grace and their economies may be crushed by significantly higher interest rates. During a crisis Marxist analysis may suddenly attract attention when an impoverished proletariat emerges. Libertarians may argue that the government interventions are to blame, and that if markets had been left alone, the nation would have been more prosperous.

- Advertisement -
Both interest on money and the moral hazard attached to government interventions and credit not backed by intended savings can be blamed for a breakdown of the financial system and the perceived need for bail outs. Unless interest on money and credit are restricted, new financial crises will probably emerge because compound interest is unsustainable in the long run. Furthermore, when a loan is not backed by someone willing to take the risk of default at the negotiated price, risks in the financial system may escalate and regulation may always lag financial innovations.

The adverse social consequences of international trade and finance are difficult to gauge. Many economists think that reducing trade barriers and a free flow of capital will be beneficial overall because of the law of the comparative advantages. This may not always be the case as central banks can distort currency markets by building up currency reserves. It is also true that many countries like the Asian Tigers were able to build their economies by protecting their home market via trade restrictions.

It seems that Natural Money is only feasible in mature societies with a sufficient level of education, political freedom and economic freedom. Political and economic freedom may sometimes be at odds, but a well educated population is aware of the trade offs that must be made when property rights and economic freedoms are restricted in order to achieve political goals. If a society is not mature, real interest rates above the level of economic growth may be needed to attract capital because of the risks attached to those societies. In that case introducing Natural Money may not work.

The expansion of human activities is hitting the limits of the planet. It may not be possible to increase material wealth in the future. It may nevertheless be possible to preserve a reasonable standard of living if natural resources are used more wisely. Negative nominal interest rates may help in this respect as they attribute a higher value to future income relative to present income, so the economy can adapt to a lower level of material wealth more gracefully.

On the other hand, economic growth with Natural Money may be higher as there will be fewer economic crises. Debt levels cannot grow out of control. The economy may grow at the maximum sustainable growth path. Governments may not need to intervene, making the economy more efficient. There may be less parasitic activities in finance at the expense of the real economy because moral hazard will be reduced. Decision making may be localised so bureaucracy can be reduced.

The improved performance of the economy may attract capital at the expense of economies allowing positive nominal interest rates. As a consequence Natural Money may become the dominant type of money in the future. This is not a matter of desire or preference. Practically nobody wanted capitalism at first, but it emerged as the dominant economic system despite all the resistance, simply because it was more efficient and produced more wealth. The same may apply to Natural Money.

- Advertisement -


1. Laboratory readings: Woergl's Stamp Scrip -- The Threat of a Good Example?, Martin Oliver, Newciv.org, 2002: http://www.newciv.org/nl/newslog.php/_v105/__show_article/_a000105-000002.htm

2. A Strategy for a Convertible Currency, Bernard A. Lietaer, ICIS Forum, Vol. 20, No.3, 1990: click here

3. Ramesses II - Wikipedia: http://en.wikipedia.org/wiki/Ramesses_II

Next Page  1  |  2  |  3  |  4  |  5  |  6  |  7  |  8  |  9  |  10  |  11  |  12  |  13  |  14  |  15


- Advertisement -

Valuable 2   Must Read 1   Well Said 1  
View Ratings | Rate It


Bart klein Ikink was born in a village in the East of the Netherlands and has lived in this region as a child. He studied Business and Information Technology and Philosophy of Science, Technology and Society in Enschede, which is also in the (more...)

Share on Google Plus Submit to Twitter Add this Page to Facebook! Share on LinkedIn Pin It! Add this Page to Fark! Submit to Reddit Submit to Stumble Upon

Go To Commenting
The views expressed in this article are the sole responsibility of the author and do not necessarily reflect those of this website or its editors.

Writers Guidelines

Contact AuthorContact Author Contact EditorContact Editor Author PageView Authors' Articles
Related Topic(s): ; ; ; ; ; , Add Tags
- Advertisement -

Most Popular Articles by this Author:     (View All Most Popular Articles by this Author)

A far more efficient economic system is possible

Paradise Found

Multiculturalism Is One Of The Greatest Successes Of All Time

Conversion plan to the natural money financial system

In the future there will be no interest on money

Negative interest rates: the economic singularity