Interest and inflation free money
'Interest and inflation free money' by Margrit Kennedy (17DM prepaid from Permakultur Institut, address below).
Why do we have a money problem? Margrit Kennedy's answer in this booklet is that it is because 'of the payment of interest from those who have less money than they need to those who have more money than they need.' To summarise her arguments:
Interest acts like a cancer in our social structure, with money following an exponential growth pattern. Inflation through the printing of money is a way for the government to overcome its increasing interest-related indebtedness. Government income in West Germany rose only 300% between 1968 and 1982, whilst its interest payments rose by 1,160%.
'In contrast to interest, a money system in which people would pay a small fee if they kept money out of circulation'
Kennedy and others propose, in contrast to interest, a money system in which people would pay a small fee if they kept money out of circulation. Everyone would have two accounts, a current account losing 6% a year, and a savings account with no interest (but with the new money retaining its value). Borrowers would pay only a risk premium and bank charges (amounting to about 1.5%). Banks too would be subject to use fees if they were to sit on their money, so would be keen to give loans. Banknotes would be printed in different colours, with some recalled once or twice a year, without prior announcement.
'Land reform would be required. Owners of land would pay 3% of the value of their plot to the community each year and this would be used by the community to buy land which came on the market'
Land reform would also be required, or there would be a tendency for surplus money to be attracted to land speculation. Owners of land would pay 3% of the value of their plot to the community each year and this would be used by the community to buy land which came on the market. Alternatively, land owners would pay no fee for 33 years; after which the land would belong to the community, with the ex-owners and their descendants retaining the right to use the land - with payment of a 3% lease annually.
Tax reform would also be needed or otherwise the economic boom following the introduction of interest-free money would have serious environmental consequences. Income tax would be replaced by a product tax related to the environ-mental costs of the product.
'People invested in furniture, artwork and everything else that promised to keep or increase in its value'
Kennedy sketches several historical examples, such as the 1932 Worgl labour certificates in Austria (described in the next piece), to illuminate her monetary arguments. She tells how between the 12th and the 15th centuries in Europe a money system was used called 'Brakteaten'. Issued by the respective towns, bishops and sovereigns, it helped in the exchange of goods and services, whilst also, unfortunately in Kennedy's view, serving as a means of collecting taxes. For every year the thin coins made from gold and silver were 'recalled', one to three times re-minted, and devalued on average about 25% in the process. Since nobody wanted to keep this money, people instead invested in furniture, solidly built houses, artwork and everything else that promised to keep or increase in its value. Some of the most beautiful works of art and architecture came into existence. 'For while monied wealth could not accumulate, real wealth was created.'
Kennedy also quotes a prophetic letter by the economist Sylvio Gesell who in 1890 had propounded the use-fee as a replacement for interest. His letter to the editor of the newspaper 'Zeitung am Mittag' in Berlin was published in 1918, shortly after World War I, when everyone else was talking about peace and many international organisations were being created to secure that peace:
'In spite of the holy promise of all people to banish war, once and for all, in spite of the cry of millions 'Never a war again', in spite of all the hopes for a better future, I have this to say: if the present monetary system, based on interest and compound interest, remains in operation, I dare to predict today, that it will take less than 25 years for us to have a new and even worse war. I can foresee the coming development clearly. The present degree of technological advancement will quickly result in a record performance by industry. The build-up of capital will be rapid in spite of the enormous losses during the war, and through its over-supply will ... (affect) ... the interest rate ... Economic activities will diminish and increasing numbers of unemployed persons will roam the streets ... within the discontented masses, wild, revolutionary ideas will arise and also the poisonous plant called 'Super-Nationalism' will proliferate. No country will understand the other, and the end can only be war again.'
'We can predict a crash mathematically. But instead of learning the hard way, we may chose the soft evolutionary path'
We have been warned. 'We can predict a crash mathematically,' writes Kennedy. 'The question is just when and where it starts. But instead of learning the hard way - which means economic disaster and social chaos for millions of people - we may chose the soft evolutionary path of change.'
Dr Margrit Kennedy, Permakultur Institut, Ginsterweg 4-5, D-3074 Steyerberg, Germany (tel 49 5764 2158; fax 49 5764 2368).
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