“Moneyless” is simply a bad term.

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by Enrique Lescure

Introduction

EOS is a group that aims to build a post-monetary  [originally “moneyless”] sustainable Terran civilisation based on science. We want to build things, test things and show the world that we can live well in balance with nature and without money.”

I would argue that sentence serves to create confusion. While probably a majority of the Earth’s population has a relationship with money characterised by a sense of anxiety and dread for when the bills are due, there is another – significant – minority that are neutrally or positively disposed towards the concept.

For them, and also for many others – who too well are reacting with dread when hearing the term “moneyless” (since they are accustomed to a moneyless existence in a world where you need money to survive) – the message outlined in the quote above is not evoking positive reactions.

Ultimately however, we as a movement need to use language in a very precise and consistent manner, and having too much of a focus on money without properly defining money is a strategy that can lead to us being misconstrued or being interpreted as out of touch with reality.

Ultimately, the biggest problem with money today, from an ideological and political perspective, is that the general public does not know what money is.

TL;DR

  • Money was originally an organic invention born out of trade exchanges.
  • Nowadays, money is created through the issue of debt, which requires constant exponential growth.
  • That leads to the destruction of the Earth’s biosphere.
  • The EOS has devised an alternate system where we are basing the value of our currency on energy instead of market demand.
  • We intend to test that model, not implement it immediately.

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 Money as a result of barter

One of the most irritating misunderstandings an EOS lecturer could endure is when – after they have gone through the trouble of explaining Energy Accounting – parts of the public still imagine that we want to go back to barter. Therefore, it is important that the lecturer tries to explain our stance that we do not wish to return to a pre-monetary system but go forward to a post-monetary one.

Some people may even think that barter is better than using money, most likely out of aesthetic or cultural reasons (especially those who find Gift Economics to be a good idea). However, money arose already before minted coins, and before anyone called it money.

The problem with barter is that the sheer amount of goods tend to make trade very complicated. If individual A desires good X in return for good Y, but individual B (who possesses good X) doesn’t want good Y but good Z, individual A has to go to individual C who has good Z and desires good Y. Eventually, such organic markets tend to centre around a “key good”, either an actual good (like dried fish in medieval Sweden), or a symbolic token (like colourful pearls as in some Caribbean cultures) which by unwritten agreement and cultural norms become the good that is used as a currency to gain access to the other goods. Often, there were several currencies in operation at once in such systems, and they tended to vary regionally.

Money did not arise with coinage, but grew organically from society.

The reasons why kingdoms and city-states started to mint coins was to be able to pay armies and establish control over trade flows, in order both to be able to raise revenue to protect the population and to wage wars against neighbouring political entities. Another good thing with metal-based currencies (from the perspective of the monarchies) was that they were naturally scarce (unlike sea-shells) and did not decay over time (like dried fish and eggs).

The main problem with metal-based currencies during the medieval age, was that they were deflationary, meaning that money had a tendency to accumulate in the hands of major land-owners that provided the cities with food necessary for survival, creating enormous inequality and hampering trade. To counter that, kingdoms and city-states generally issued coins during festival years to stimulate trade periodically.

Money as debt

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Fiat money gradually evolved since the late 14th century, originally born amongst Italian banker families in the wealthy city-states of the Po Valley. It largely co-existed with metal (gold and silver) as an insurance security for centuries, until it finally started to stand on its own legs in 1971, following the abandonment of the Bretton Woods system.

I have explained in detail earlier about how this system is operating, so let me just reiterate it in a very short summary.

Banks operating globally, nationally, regionally and locally, are today providing credit to companies and consumers alike. These credits are actually multiplied from the banks reserves – meaning that the banks are actually lending out more capital than they have. Capital that must be paid back at interest.

This credit-based system demands constant economic growth, since money that is issued at must be paid back. Since you cannot create value out of thin air, economic production needs to grow to ensure the ability to repay loans. Of course, new loans are being issued continuously, guaranteeing that the total gross domestic debt of humanity always is larger than our gross domestic product, bonding us to exponential growth forever.

The problem

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Since economic production has to grow exponentially, that means that our collective effect on the Earth’s life-supporting systems have started to make said systems decay and degenerate at an accelerating pace. The climate is disturbed, the oceans are dying, soils and freshwater reserves are depleted and land-based eco-systems are being replaced and outcrowded by destructive mono-cultures.

This is not only a question of continuous destruction, but also of the creeping realisation that we’re causing a sixth mass extinction. At the current rate, we will move towards a global biosphere collapse by the end of the 21st century.

The challenge

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The Earth Organisation for Sustainability needs to be able to explain why the current system is deeply problematic and how it destroys the life support systems of the Earth. We are moving in the right direction, but overally, most people still believe that the current fiat-based growth-dependent monetary system is sound and see it as as natural as breathing air or drinking water.

The challenge must be to systematically educate the public about the facts of how the current system both has created the modern western civilization, and is about to destroy it. To create an environment where the system is no longer seen as accepted or natural or “the best possible system”, but as something artificial that has been imposed over us and which is not stable nor sustainable.

The current fiat system needs to be delegitimised, but it also needs to be explained.

If we just attack “money” as a concept, we will mainly attract moralists and technological luddites. Therefore, instead of stating that we want to abolish money, we should state as it is – that we want to explore the potential for an energy-based currency based around the capacity of the planet to provide for our needs.

We must be precise when we use language.

Why we are failing (Proposed article)

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Okay. Here is another proposed article for the updated EOS website. It is pretty much longer, and I know the articles should be short. But I have comprimed 500 years of human history in less than five pages. It was pretty difficult I must admit.

Introduction

 

We want to apologise for the length of this article beforehand.

Energy accounting is originally a concept from the US technocratic movement of the 1930’s, which EOS has developed as a conceptual template. To understand what Energy Accounting is and why we want to carefully examine it as a potential replacement to the current monetary system, we need to understand how the current monetary system is working.

 

Firstly, what is money? Money is a medium of exchange, in order to simplify transactions between various parties. Originating in the mists of the Bronze Age, monetary economies connected regions and allowed trade to perpetuate itself.

 

Yet, we must understand that early monetary regimes were often tenuous at best, most often local and requiring the protection of patrons with access to mines – most often the dukes, kings, sultans and emperors of the various states of the medieval world.

 

This could also help to explain our points, as to why our current system is failing in regards to our collective environmental obligations as a species.

 

Early Monetary Systems

 

The first monetary systems that arose either arose spontaneously from small communities, which used either a “key good” or a form of “semi-available rarity” as currency. When the first coins were made, in Asia Minor around 2700 years ago, they were made both to stimulate and facilitate trade between villages and towns, and to strengthen the legitimacy and strength of the early state (especially as money often trickled down into market places from the payment of soldiers and other public employees).

 

The rise of money is a thoroughly complex process, but the rise of the monetarised global system is a relatively recent occurrence. For much of the ancient and medieval world, money was inherently deflationary as its value rested on the control of copper, silver and gold. Thus, the system encouraged savings and hoarding, and retarded the development towards a full-scale monetary price system. In medieval markets, every licensed merchant often had with him his own scale, to judge the value of the money in terms of its weight.

 

Even in the advanced Roman Empire, only a small fraction of the taxes were collected in the form of money! Most taxes were collected in the shape of grain, minerals and other resources.

 

Most people in the pre-industrial world were self-sustaining farmers and rural labourers, who for most of the time directly worked to feed themselves from what they could produce out of nature.

 

The rise of Banking

 

Trade could be a perilous business during the middle ages. Highwaymen, barons, wars, storms, the Black Death and other occurrences could easily separate a merchant from his gold during the many dangerous voyages through lands and seas.

 

The wealthiest and most prosperous region of Europe was northern Italy, where the cities never had vanished during the dark centuries following the fall of the Western Roman Empire.

 

During the Renaissance, cities like Venice, Genoa, Milan, Pisa and Florence sent out merchants far and wide throughout the Mediterranean world, Europe and the Middle East, often exchanging gold for valuable luxury products from the Far East.

 

To facilitate this exchange, several of the great trading families began to engage in the insurance business. Gold chests were heavy, clumsy and hard to transport, not to speak of being magnets to thieves and pirates. Families like de Medici could specialise in offering securities by depositing the gold (for a fee) to other merchants, giving them a receipt which allowed them to gather the same amount of gold in for example Alexandria, Constantinople or Kaffa.

 

These firms soon started to lend money to various cities and kingdoms for interest fees. Thus, “banking” in the conventional sense was born.  

 

The rise of Fractional Reserve Banking (FRB)

 

Given that both the depositing and the lending were made with receipts, the gold would not under normal circumstances leave the confinements of the bank vault. It would be impractical for the client to withdraw it physically, and people who deposited gold in such a bank where often years away travelling. At the same time, borrowing money became increasingly popular, especially as the European monarchies and republics of that era became increasingly dependent on hiring mercenaries to fight their many destructive wars. Banking houses were offered lucrative contracts, without having the necessary deposits to be able to lend money to the states in question.

 

We don’t know exactly when banks started to lend money without having access to the necessary balance to do so, but it stands evidently clear that the temptation and the low risks associated with the scheme would soon or later have coalesced into the practice today known as Fractional Reserve Banking.

 

Shortly speaking, Fractional Reserve Banking is a mechanism that allows banks to lend more credits than are covered by their deposits. This is possible because of multiple clients depositing their fortunes at the same time, and that it is unlikely that all these clients would remove their deposits at the same time.

 

Moreover, the clients were thereby obliged to pay back gold which had never existed in the first place, plus interest.

 

In the terms of laypersons, Fractional Reserve Banking means that you lend out money that you don’t have, while those borrowing the non-existent money are forced to pay back in the form of real money, with a little bit more.

 

Where the alchemists of the dark crypts and poisonous laboratories failed, the perfumed bankers living in the luxurious Venetian and Florentine palaces succeeded.

 

Sustained capital accumulation and western supremacy

 

Even though Northern Italy was eventually destroyed, through the violence of the mercenary armies funded by the Italian bankers, Fractional Reserve Banking is a part of the explanation why the western world from the late 15th century and onward managed to create sustained economic, technological and colonial expansion.

 

The banks of Italy, and later of the Netherlands and Britain, were funding colonial ventures, the development of new weapons and technologies, scientific breakthroughs, commercial enterprises, the booming slave trade and the establishment of the first factories.

 

The reason why is simple. With a full deposit cover, the bankers who lend money would lend out gold that actually is entrusted them by clients, and thus would be unwilling to support projects that hold high risks for failure, or which are new and untested. Thus, the employment of FRB systems can accumulate and utilise capital more aggressively than the crude agricultural economies previously were able of.

 

During the 19th century, the gradual gains of trade, colonialism, technical and scientific innovations and capital expansion culminated in a sustained industrial boom that transformed the entire civilization. The modern world was born.

 

As innovations and growth rushed, however, so did the many bankruptcies and failures. The world grew faster, and with the telegraph and railways, information spread quickly throughout the now very much smaller world. Rumours, true or false, stock rushes, companies and ventures falling apart and the increased competition for more and more scarce resources fuelled an increasing number of bank runs – events when the deposits were retrieved by the clients as a result of a loss in trust. Such events usually led to liquidation of the bank itself, and the destruction of capital – both real and imaginary. It says itself that unregulated capitalism from the 1870s and onward experienced more and more shocks following the collapse of one commercial bank after another.

 

To counter this development and to restore stability, most developed nations turned towards establishing central banks in order to guarantee the deposits of the commercial banks and their clients – if necessary by sacrificing the interests of the weakest citizens. In the USA for example, the US Congress of 1913, at the behest of the big commercial banks and the US mega-corporations, established the Federal Reserve during the first Wilson administration.

 

Usually, central banks are a pillar stone in regards to the regulation of interest. This practice is referred to as interventionist monetary policy. After the Second World War, it has usually been coordinated with interventionist financial policies, which are carried out by governments. These policies exist in order to smoothen the business cycles and prevent either overheating or sudden crashes.

 

Nowadays, the signs are everywhere that the system is crumbling. The dominant power in this system, the United States, is suffering massive de-industrialization and an enormous debt on both the federal and state level. The European economy is stagnating. China is experiencing declining growth rates and increasing environmental pollution and class conflicts.

 

The system has accumulated a mountain of debt, and we are on the verge of what can spiral out of control and become World War Three.

 

So, why are we failing?

 

The addiction to growth

 

The global monetary system is not dependent on growth because it has the wrong priorities, or because it is in the knees of multi-national corporations and consumerism. It is not dependent on growth because of “human nature” or because of greed, even if greed plays well into the mechanisms it is built on.

 

It is dependent on growth because it must grow, otherwise it will start to crumble and eventually collapse.

 

Think of it for a moment.

 

Only 10-15% of the loans of modern commercial banks have to be covered by the deposits of the customers. Thus, the banks are really lending money from the future. This means that FRB has not only realised alchemy, but also for all purpose invented time-travelling!

 

Some critics claim that FRB is a system which is creating money from thin air. That is however not entirely true. The money is created in the figurative world by the banks, but then created a second time – this time in the real world – through investments, labour and the production of goods and services. In short, the economic activities of all the corporations and individuals who have been compelled by need or by their dreams and ambitions to ever accept a loan from a bank.

 

This process allows the capital to multiply itself, and make credits accessible for the future development of the economy.

 

The hidden danger in this pyramid scheme lies in the fact that it requires permanent economic growth, or at least the belief in permanent economic growth. A growth which can turn the debts in the balance sheets into actual financial assets.

 

For this to be permeated however, it requires one thing:

 

The continued destruction of the Earth’s biosphere.

 

What really matters

 

For hundreds of millions of years, the Earth has had a complex system for the acquisition and renewal of resources. This system has been characterised by complex relationships unified within an emergent dynamic equilibrium. This system is called “the biosphere”.

 

It can more simply be referred to as Life.

 

The human civilization is ultimately resting on the fact that we are based on a planet characterised by a wide variety of ecosystems of living beings. The current way in which we are heading is the equivalent to raising a palace while removing the ground and foundation of to gather more materials. It is foolish, and not the least sustainable.

 

It stands clear to every aware individual that our civilization at the present point is on the route towards causing a new mass extinction amongst the species, bringing the entire Eocene Biosphere to an end.

 

Climate change is but the most well-known of the challenges ahead. The swift increase of the global average temperature is upsetting weather and drought patterns, affecting the natural cycles of storms, contributing to an accelerating rise of the sea levels, and affecting multiple species of animal and plant life negatively.

 

There have been several major conferences on this issue, and all of them have either produced semi-failures or complete breakdowns. While the leaders and decision makers have been aware of this issue for the better part of 20 years, they have been unable to turn the development around or even slow down the increasing usage of energy that produces CO2 emissions.

 

There are many reasons for this monumental human failure. You can blame the oil lobby, the United States, China, the consumers, the politicians, yourself or human nature in general for this failure.

 

The fact, however, is that it is extremely difficult to enact any kind of meaningful change in the energy sector as long as we have  a monetary system that automatically seeks to expand as much as possible, since a contraction will mean that it will be crushed underneath a mountain of debts piling up before it.

 

At the same time, we are silently allowing a real deficit to constantly grow, by using more resources for every year than the Earth can possibly renew. The continuation of that practice will eventually produce an ecological disaster of hitherto unseen proportions, at least for the last 65 million years.