Our market system has shortcomings. Regional governments / democracies cannot cope with internationally operating companies. Moreover, international banks cannot be tackled by national governments. The international intertwining of governments, international banks and multinationals means that inequality continues to exist worldwide and irreparable environmental and climate damage is caused worldwide. That is a major shortcoming of our economic system. In my Blog “Get started!” I explained that we can break through this so-called COMBI-Complex, i.e. the Complex of gOvernments, Multinationals, and Banks that operate Internationally, with cryptocurrencies of 2local and a cashback for local and sustainable products. In this Blog I will discuss our deficient money system and show that 2local cryptocurrencies are an alternative to this and that multinationals are put on sidelines by the 2local cashback system that stimulates local and sustainable initiatives. Governments will also see the benefits of this innovative cryptocurrency system..
Our monetary System shows a lot of failures. Money creation is done by private companies, namely by the banks. Money is created by making debts. Banks determine who will initially receive this money for what and under what conditions. They then tax it with interest. Debts must be repaid and interest must be paid on top of that. This is only possible with economic growth. The question is how long this can continue, given the pace at which we are exhausting the raw materials and consumables on Earth. To stop environmental pollution and climate change, we will also have to limit economic growth. In finite world, continuous economic growth cannot exist without crashes.
At the moment people are forced to deposit money with the commercial banks, with the result that they are at risk. Everyone who has money in the bank invests in banks, whether he / she wants it or not. This puts everyone who now has money in the bank at risk. In a bank run, the bank can go bankrupt..
Money creation is done by international commercial banks. This will irrevocably lead to two conflicts:
— conflict public — private; Banks are commercial institutions. The commercial banks want to make as much profit as possible and run great risks, for example by raising the total private debt far too high. These are now even higher than before the crisis. So, commercial parties are aimed at making a profit, while public interests are at stake. Money and payments, payment infrastructure, lending and financial stability, and monetary policy are a public task. Public interests are now managed by commercial institutions. That is inconsistent.
— conflict national — international; The banking sector has an oligopolistic position in the economy. The three largest banks currently own 75% of the financial sector. International banks have too much power, they cannot be called to order by national governments, which are responsible for public tasks. The size of the balance sheets of the three largest banks in the Netherlands has only increased since the crisis.
The financial system is unstable and reckless. It constantly leads to new crises. Banks do stupid things when supervision is insufficient. Then the system crashes, as we saw in 2008. Money is created by contracting debt. Debt holds us in a grip and puts the economy into stagnation. There is a large amount of debt that can no longer be paid. Then the problems are put to the public sector. And the system is about to burst. Suspended assets are sold to the ECB. This constantly leads to tensions, which regularly lead to crises. The money system dominated by banks falls short of service to society. It disrupts the market. It turns out to be out of control and leads to instability and inequality. This undermines society and democracy.
We must distinguish between:
1. Money creation, for example companies are financed by the banks. Businesses receive money from the bank, which the bank created out of thin air. The companies therefore have a debt to the bank. We must create money without being guilty.
2. Lending, based on market principles, is risky / risk-bearing. This includes that they can go bankrupt.
In order to grind the money system more stably and to function better, the ‘Our Money Foundation’ has put forward ideas that result in the need for a new bank that ensures that we can pay and save safely, and to set up a safe payment and savings bank. (digital sock). The money press should not belong to commercial parties., but serve public interest. The new bank has a kind of utility function and is part of the public sector. The bank makes it easy for us to transfer cashless funds, debit card payments and take advantage of and save all the digital conveniences without running any risks. It’s about safe parking of money and free savings. Hoarding money is also not the intention, therefore we should offer the credits for the citizen for free, seen as a utility, but start to tax progressively from a certain amount.
An action by ‘Our Money Foundation’, in collaboration with the theater group ‘De Verleiders [The seducers]’ and writer / economist Ad Broere, has led to a citizens’ initiative, a report by the WRR (Scientific Council for Government Policy), a motion by member of parliament Mahir Alkaya and various parliamentary debates. The public debate about the money system led to a broad consensus that there should be a safe alternative to the bank account, to allow account holders to freely choose whether or not to make their money available to banks, to increase the diversity in the banking landscape, forcing banks to behave more responsibly, to make the money system more manageable; and stabilize the money system.
The government, as well as the WRR in its report ‘Money and debt’ in January 2019, think that:
— banks are only needed to deal with savings and payments,
— the total amount of private debt is far too high,
— the large mountain of debt is causing instability and unbalanced economic growth
— the options for dealing with crises are limited and controversial
— instability is inherent in the financial system,
— there is an imbalance between public and private
— the combination of private activities and public functions creates permanent tensions, which are inevitable,
— the position of the citizen should be strengthened.
Although the government and the WRR largely agree with the criticisms, there are still no proposals to tackle this problem structurally. In June 2019, the Minister of Finance informed the House of Representatives that the cabinet sees insufficient reasons to set up such a bank itself.
Good ideas to change the monetary system, such as the ‘Our Money Foundation’ initiative with the establishment of a safe payment and savings bank, therefore have no chance and / or are adjusted so that they fit into the Combi complex, ie the Complex of gOvernments, Multinationals, and Banks operating Internationally.
The only thing the government is considering is to offer citizens the opportunity to open a cashless account with ‘De Nederlandsche Bank [Dutch Central Bank]’. The Dutch Central Bank can then offer payment accounts and also make it possible to save at The Dutch Central Bank. For this, the Dutch Central Bank and the European Central Bank must first agree. However, there are major objections to this, because The Dutch Central Bank is a banking supervisor and would therefore also become a supervisor of itself, which is of course not possible. Still, the Dutch Central Bank investigated the possibility of its own digital currency, following Facebook’s plan to introduce its own crypto currency, the Libra. The government believes that the deposit guarantee (guarantee up to 100,000 euros) offers sufficient security to citizens. Moreover, the government believes that there are disadvantages to the ‘Alkaya system’, as it is also not safe, because in life there is nothing safe! In addition, rules are already set for banking. And, says the minister, suppose it is a success, the banks will pay for the costs of the public institution. The government therefore prefers to use controversial measures, such as interest rate cuts and bond purchases, and possibly even more controversial measures, such as monetary financing of government expenditure. The WRR says that containment of systemic risks will only work to a limited extent.
However, there is a solution:
Take the initiative together with the 2local platform. The 2local platform is an innovative blockchain powered loyalty platform using cryptocurrencies, which offers a cash back and a smart marketplace that connects local and sustainable companies and consumers. Payments can be made easily, cheaply, digitally and quickly, also internationally. The 2local platform has three key points:
A cashback for local and sustainable products, by which people with less money also have access to sustainable products. This will increase sustainability and prosperity in the world;
The cash back system is integrated in the own blockchain of 2local;
The value creation of 2local is shared with people who actually use the cryptocurrencies of 2local.
Harry Donkers
CSO at 2local
