[iDC] Don Tapscott's Wikinomics: A Dismal Netology?

[keith at thememorybank.co.uk]

Paolo,

Thanks for the links. I have spent some time with the film, Money as debt
and recently wrote this about it.

The film, Money as Debt -- an underground hit in activist circles -- seeks
to explain where money comes from.  Most people probably imagine that the
government issues the money they use and that, under its surveillance,
banks lend amounts that are covered by assets such as gold and property or
at least by cash deposits. In fact, over 95% of the money in circulation is
issued by banks whenever they make a loan. The ‘fractional reserve system’
traditionally constrained them to lend up to nine times the value of
deposits with the central bank; but this ratio has since increased and in
some cases no longer exists. The real basis of money, the film points out,
is thus our signature whenever we promise to repay a loan. The banks create
that money by a stroke of the pen and the promise is then bought and sold
in increasingly complex ways. The total debt incurred by government,
corporations, small businesses and consumers spirals continuously upwards
since interest must be paid on it all. The film briefly mentions some
possible remedies, including local currencies.

This attempt to demystify money is admirable, but the message is
misleading.  Debt and credit are two sides of the same coin, the one
evoking passivity in the face of power, the other individual empowerment.
The origin of money in France and Germany is thought to be debt, whereas in
the USA and Britain it is traditionally conceived of as credit. Either term
alone is loaded, missing the dialectical character of the relations
involved. The role of state-sanctioned banks in creating money involves
some sleight of hand; but they are also subject to the same financial
constraints as ordinary businesses. The film demonizes the banks and
interest in particular, letting the audience off the hook by not showing
the active role each of us plays in sustaining the system. Money today is
issued by a dispersed global network of economic institutions of many
kinds; and the idea of economic growth is fed by our own norm of getting
ahead, not just by bank interest.

Money as debt is a fable that never moves beyond the nationalist
assumptions of twentieth-century North American society. It says nothing
about the current world economic crisis. This has features that are well
enough advertised in the media. The huge trade and budget deficits of the
US economy are financed principally by Japan, China, the Gulf States and
Britain (but not the US banks). The dollar’s slide seems to be limited only
by its role as the world currency and unit of account for the oil trade and
by its creditors’ desire to retain the value of their Treasury paper. The
interests at stake in the global energy economy are manifested in the war
for Middle East oil; the trade imbalances reflect the transfer of
manufacturing production and many services from the West to Asia.
  
Moreover, since the invention of money futures in 1975, world money flows,
fuelled by bets on the future prices of notional assets such as stock
market indices (‘derivatives’), now dwarf the volume of international trade
and national budgets.  The US housing market is a major part of all this
paper debt, especially the dodgy loans known as ‘sub-prime mortgages’ now
suffering massive default. The faith of the British middle classes in
consumerism financed by ever rising housing prices hovers on the brink of
the financial crisis. Reference is occasionally made to the Great
Depression of the 1930s, but rarely to more recent demonstrations of the
system’s fragility: the global slump induced by the oil price hikes of the
1970s or the crash of 1987. We could be entering a new stage of capitalism
where markets have been rationalized and risk is managed efficiently; or,
more likely, we are heading for a deflationary crisis of unprecedented
severity.  In either case, a lot more political education is needed before
people can begin to reduce their dependence on an impersonal economic
system and develop a more personally meaningful relationship to money.

Cheers,

Keith

Original Message:
-----------------
From: paolo massa paolo at gnuband.org
Date: Thu, 30 Aug 2007 11:54:59 +0200
To: keith at thememorybank.co.uk, playethical at gmail.com, idc at mailman.thing.net
Subject: Re: [iDC] Don Tapscott's Wikinomics: A Dismal Netology?


I would like to suggest two resources that I think are relevant for this
thread.
They are linked from this blog post
http://www.gnuband.org/2007/08/22/avoiding_central_money/

1) The video "Money as debt"
http://www.gnuband.org/2007/04/09/money_as_debt/

2) And the ripple project. Ripple is an open-source software project
for developing and implementing a protocol for an open decentralized
payment network.
http://ripple.sourceforge.net/
In particular check the paper "Money as IOUs in Social Trust Networks
& A Proposal for a Decentralized Currency Network Protocol"
If you are interested, let me know your email address and I'll
probably open a little line of credit (trust!) for you on ripplepay
;-)

P.


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