This might seem like a weird statement to make on a website that is all about an alternative monetary system. And yet, at the core, it isn’t about the money at all. It’s about the kind of behaviour the monetary system enables and encourages. It’s comparable to a board game. The board game is not about the board and the paraphernalia that go with it. It’s about the fun you have when you play it with your friends. You can make a board game with delicately cut pieces and exquisite art which looks amazing when put on display. But the rules make the game. If they make a boring game you’re not going to have much fun with it but if they’re designed to make game play exciting and fun the pieces and beautiful board are just a nice to have.
In the end, a coin is just a token. One for which we agree it can be exchanged for value. It are the rules that surround the use of these tokens that create the ‘game’ which we call our economic ecosystem. These rules also steer our behaviour within this ecosystem.
Restarting the current economy
Say we would start our current economic ecosystem from scratch. We’ll simplify some things like the size of the population and we’ll ignore sovereign money, which only counts for 3% of available money anyway. The overall dynamics remain the same for larger groups though.
We set up an economy with 10 people. Initially there is no money in the economy because it hasn’t been created yet.
Let’s have each person go to the bank to get a loan so they can start doing business. To keep things simple, everyone goes and get $100,000 from the bank.
Let’s assume they all have to pay it back after 5 years, with interest of course. With a 1% compound interest, this results in everyone having to pay off $105,101.01 Let’s round it down to $105,000. So, the total amount of money in the economy is $1,000,000 but the total sum that needs to be paid to the banks is $1,050,000. This means some people will not be able to pay off their loans. It also means that during the 5 years before payback there will be a fierce competition for the money. If I manage to pay off my loan, at least someone must be in trouble. If we all hold on to our initial amount, we’re all in trouble! This dynamic probably explains why people become less willing to share and less willing to help after having handled money. Because if I give it to you then I won’t have it anymore and I’m not sure whether I’ll get some money from someone else. It’s even worse than a zero sum game.
The bank is the big winner because everyone is basically working to bring the interest to them. And they invest the majority of it in the financial world.
This dynamic is not so blatantly visible in today’s economy due to the scale of things and because we got used to the effects. People don’t have synchronous loans they all need to pay off at the same time for example. So when payment is due one can get money from someone for whom the pressure is not so imminent. But just because it’s not visible doesn’t mean it’s not causing damage. It’s a bit like a cancer that hasn’t been diagnosed yet. Just look at the numerous examples where money leads to violence and feuds. Family inheritances, friends that owe each other money, business partners who fall out over monetary issues, fraud, … The examples are endless.
Putting unwanted consequences in the spotlight
Our current monetary system is creating a set of behaviours none of us wants. Here’s a non exhaustive list:
- Hyper competition: If I have a great idea established ‘common sense’ tells us I should keep it for myself and not share it because otherwise someone else will be making money of it instead of me. This leads to a lot of ideas never being implemented and a huge waste of human capacity on lawsuits and regulations. This dynamic stifles innovation and is a direct effect of what has been described in the previous section.
- Advertisements everywhere: Are you old enough to remember the time where you could watch a movie on TV in one go? Without being interrupted by commercials? I remember that time. It was fun watching a movie back then. These days we get advertisements rammed down our throat wherever we go or look. When you go to the movies you first have to sit through the advertisements, YouTube content starts with it and gets interrupted by it on a regular basis. Almost every web page you visit throws advertisements in your face, on the streets it’s hard to look anywhere and see no advertisements, … This is a consequence of the above mentioned hyper competition. When I sell a product or service I need to make sure I get the customers and not you. So I need to be visible! Preferably everywhere. Because the more people see my product, the higher the chance they’ll buy it. Being exposed to something often enough nudges us to also buy it. And since everyone is doing this new techniques are used to make sure we see those commercials. It’s not as dystopian as in this Black Mirror episode but watching it somehow feels like it’s already too close to reality. This overload of advertisements is an invasion of our private and public space and more importantly, an invasion of our private time. How much time do we collectively waste on watching or listening to advertisements?
- Breeding dishonesty: A study found that banking culture actually breeds dishonesty. This seems to come from a high focus on money and number crunching. Extrapolate that to executive boards who are obsessed with making profits and you arrive at things like the VW diesel and other scandals. All with destructive effects on our society at large. An underlying cause of this dishonesty has to do with the fact that having a lot of money is rewarded with more money, combined with the constant subconscious nudge that it’s better to have more just in case something goes wrong. And to top it all off, large amounts of money are the gateway to power.
- Reluctance for long term investments: Short term capitalisation is king in the world of investments. The faster you can make money, the better. But we need long term investments if we want to build a sustainable society. Short term profit seeking can be very destructive. Take forests for example. A lot of money can be made in a short timespan by clearcutting all the trees. What is left behind is a wasteland which takes years to recover … if it recovers at all.
- Violence towards and oppression of the poor: When governments make cuts to budgets, what ends up on the chopping board all too often? Social support programs for the poor. The weakest in our society are most often hit the hardest due to a lack of money. Money which, as described above, we are all carrying to the banks which then carry it to the financial world where it lands in the pockets of the already rich. This is not to blame the rich, it’s a systemic trait of the monetary system. And it results in the oppression of the poor and the weak.
The list doesn’t end there but these examples should be more than enough to make it clear that a change is needed. Preferably before things become so bad that change is forced through violent uprisings.
What it’s really all about
The reason behind the creation of Circular Money is not the money itself. It’s about changing our economically driven behaviour towards something more supportive of sustainable society.