Chapter 3.8 – Loans and investments

Excerpt from the book »Gradido – Natural Economy of Life« 

»How can you finance large amounts when money is perishable?«

»Through loans. Both parties benefit from these. The lender gets their money back in full at the time agreed. If they hadn’t granted a loan, their money would have become less because of its transience. The borrower gets an interest-free loan. Here we have a classic win-win situation.«

– Joytopia

There must be loans and investments in every economic system. There are always times when you earn more than you spend and want to save the surplus for later. Conversely, there are situations where you need money that you do not have at the moment. In a monetary and economic model that integrates the cycle of growth and decay from the start, special attention must be paid to the lending system in this connection.

As always, we also get inspiration from nature on this. Please imagine two farmers who have agreed a loan in natural produce with each other. One of the farmers, whom we will call Franz, has grown potatoes this year. He has a good crop, more than he needs. The surplus potatoes would age with time and after a year would be worth only half as much as the same amount of new potatoes. The other farmer, Paul, has not grown any potatoes this year but needs some for the winter. So they agree that Franz gives Paul a certain amount of potatoes. Paul, who wants to grow potatoes next year, promises to give Franz back the same amount of potatoes next year.

Which potatoes will Paul give back, the old wrinkly potatoes or new ones? Of course he will give back new potatoes. For, firstly, he has already used up the old potatoes and, secondly, Franz also lent him new potatoes and naturally wants to get new ones back.

Franz and Paul have created a win-win situation with this barter. Franz, the lender, was able to maintain the value of the fresh potatoes and Paul, the borrower, obtained an interest-free loan. In this example nobody would think that Paul must give Franz back a different amount of potatoes than what he had received.

Loans work along these lines in the Natural Economy of Life. The lender gives the borrower a (probably) interest-free loan and gets the same amount back at the time agreed. Interest is not in fact forbidden but as many people would like to preserve their surplus money, the number of loans offered will be so large that interest will have no chance on the market. There may even be negative interest, meaning the lender will get back a smaller amount than what was lent. Even then they would have made a good deal for if they had not lent the money, it would have almost completely disappeared because of decay after a few years.

Here there are completely new possibilities for planning and organising your life. When you are young you can finance your house interest-free or even more favourably. You can save for your pension so as to have more for your retirement than just the basic income. You can plan sabbatical years, meaning times when you do not work and continue to enjoy a high standard of living. Business start-ups can be financed at a low risk. In short, the lending system always creates win-win situations for everybody.

What impact will our new monetary model have on quality of life, working climate and productivity? This is the subject of the next section.