1 / 15

Co-operative Money – Back to the Future

Co-operative Money – Back to the Future. Pat Conaty Co-operatives UK 13 February 2012. Usury Law demise in Britain. 1235 – illegal for Christians to lend at interest 1545 – Henry VIII sets interest ceiling of 10% 1651 – Cromwell lowers ceiling to 6% 1776 – Adam Smith calls for 5% ceiling

ozzie
Download Presentation

Co-operative Money – Back to the Future

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Co-operative Money – Back to the Future Pat Conaty Co-operatives UK 13 February 2012

  2. Usury Law demise in Britain • 1235 – illegal for Christians to lend at interest • 1545 – Henry VIII sets interest ceiling of 10% • 1651 – Cromwell lowers ceiling to 6% • 1776 – Adam Smith calls for 5% ceiling • 1854 – Usury ceiling abolished • 1927 – Moneylenders Act ceiling of 48% • 1974 – Consumer Credit Act abolishes ceiling

  3. Exorbitant charges for liquidity in the UK Legal lenders (2012) - Loan costs (APR) 1. Credit cards: 13% - 50% 2. Pawnbrokers (secured loans):70 - 90% 2. Moneylenders: 350 – 500% 3. Payday lenders: 350 – 2000% 4. Bank overdraft (unauthorised): 70 – 800,000%

  4. Monetary Reform – 1930s • 100% Money: ending of fractional reserve banking – (Irving Fisher proposal – 1936 book published) • Mutual demurrage currency: debt and interest-free • ‘Cheap money’: monetary reform of Keynes: central bank cap on bond rates below 2.5% real

  5. Seigniorage – 100% Money Public issue of money interest & debt free – many precedents: • American colonial money – free issue of notes (inflationary) • British £1 and £2 notes (1798 to 1821) and World War 1: Bradbury notes issued in 1914 • Lincoln’s Greenback dollars – US Civil War • Bank of Canada: 1938 onwards to stimulate the economy • Quantitative Easing: Japan, USA and UK • QE: restricted as to purpose (not social or’green’) 7. Positive Money (UK) and ‘Greening the US Dollar’ campaigns from 2011

  6. Mutual lending: Interest-free practices forgotten • Terminating Building Societies: 1775 to 1980 - mutual savings in pubs for building houses locally - over 1000 by 1870 replaced by interest-lending 2. Co-op Time stores (USA) and Labour (UK) exchanges: commodity banks with money based on hours: 1827 to 1834 3. Starr-Bowkett societies: 1843 to 1890 mutually saving and lending and a draw to borrow 4. Mutual banking (interest-free theory) – Edward Kellogg, Pierre-Joseph Proudhon, William Greene and Silvio Gesell

  7. Silvio Gesell: Co-operative Money Theory Natural Economic Order (1918): Practical Mutual Banking • Demurrage currency: from ‘black money in Middle Ages’, 20% decline over 5-6 years; coins reclaimed and reminted • Free-money with ‘negative interest’ rate of 5.2% • 1929 to 1933: applied in Germany, Denmark, Austria and the USA, stamp scrip. • Worgl, Austria: 1932-33 unemployment of 30% reduced completely, ‘free schillings’ with 1% monthly charge.

  8. Irving Fisher – Stamp Scrip and 100% Money • Yale economist and a developer of Quantity theory of money, RPI and NPV (net present value) • Supporter of Gesell and stamp scrip based on JS Mill argument (1844) about ‘freeing up access’ to working capital • Argued the case to Franklin D Roosevelt in 1932: two cents stamp weekly per $1.00, bill put to Congress in 1933 for $1 trillion • Stamp scrip banned in Germany, Austria, Denmark and USA from 1931-33 by Government and central banks • Argued in 1936 that banks should lose the power to create money as debt – 100% money theory with no ‘fractional reserve’: supportedin 1939 by 235 economists ( from 157 universities)

  9. WIR – Swiss Mutual Currency • Inspired by JAK Denmark model made illegal • Set up in 1934 to provide mutual barter between small businesses in Zurich • Provides low-cost working capital to business members who mutually own WiR (‘the ring’) • Turnover now 2 billion Swiss Francs yearly and involving 75,000 business members of a Co-operative bank • Operates as a complementary, fee-based currency • Mortgages 1.5% and 2.5% on mutual credit • Similar new mutual credit system, C3 in Uruguay

  10. Gesell inspired Keynes to develop ‘Cheap money’ ‘I believe that the future will learn more from the spirit of Gesell than from that of Marx.’ The General Theory of Employment, Interest and Money (1936)

  11. ‘Cheap Money’: 1945 to 1970 Monetary Reform of Keynes - ‘cheap money’ for stability: • Monetary reform: capping of government bonds (long, medium and short) 0.5% to 2.5% real, central bank targets • Domestic economy focus: fixed exchange rates, stop bank foreign lending with capital controls • ‘Golden age of capitalism’: social wealth redistribution, low inflation and no banking crises or depression until 1970s • UK five-year gilt mean annualised return of 1.4% (1899-2003) and 7.0% (1977-2003) - Pensions Commission (2004)

  12. JAK: European Interest-free Co-op Bank • Co-operative finance funds developed from 1931 in Denmark and from Sweden in 1965 – JAK: 1.5% of Danish money supply in 1934, before Gesellian currency banned • Innovative: similar to a hybrid between a Community loan fund and a credit union • Members save at ‘no interest’ and get secured loans at a low management charge and risk fee • average loan cost of 1.5% to 2.5% and no bad debt • Local Enterprise Banks (LEBs) – fund housing, ecological projects, social enterprises and refinance high cost debts • JAK Sweden: 35,000 members, 20 paid staff and 300 regional volunteers for local branches

  13. Other Low-cost mutual finance systems • Fund for Humanity: interest-free fund for Habitat for Humanity self-build housing groups – 500,000 homes built • Shared Interest (UK) – low-interest loans, Fairtrade co-ops • Community Development Finance (UK) – shared interest loans of 3-4% and interest-free equity loans for housing • Mutual Guarantee Societies: lower cost working capital • Community Development Banks in Brazil – 55 community banks provide interest-free loans in local currency. • Chiemgauer – ‘negative interest’ (8% yearly), 2-year currency in Germany with notes and electronic debit card in partnership with GLS Bank and 3 other co-op banks

  14. Co-operative Money - Demurrage • Alternative to credit cards – no debts to repay, just ‘use fee’ • Liquidity card for Local Economy resilience • Co-operative governance to build democratic trust • Use fees variable depending on the purpose and expiry date of the currency and commodity backing: 5% to 100% (emergency currency) • Lower transaction costs for retailers, households, public employees and businesses • Green money: extension by developing a kilowatt hour backing with renewable energy

  15. Move Your Money Campaigns • Kicked off in December 2009 by the Huffington Post in USA – to say Yes to community banking and No to Wall Street • Backed by Community Development Finance Coalition – 650,000 new credit union accounts and $50 million transferred in November 2011 • Move Your Money UK launched a British campaign – February 2012

More Related