Chapter 1 – How it is guaranteed not to continue

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

»We are stardust, we are golden, we are caught in the devil's bargain,

and we got to get ourselves back to the garden.«

– from the song »Woodstock«

by Joni Mitchell

The present economy constructed by humans works quite differently from nature. Better expressed, it does not work! For when nowadays two-thirds of humankind live below the poverty line, 24,000 people die of starvation each day and our environment is being destroyed at the same time, we cannot speak of a functioning economic system.

In the first chapter we speak about some things which are going wrong on this earth at present. We will learn something about why the situation is still as it is today and why it is guaranteed that it cannot continue in this way. In this we will refrain from blaming anyone. We have all played the game. True, we have played different roles in the theatre of life but we have played in it. Our greatest appreciation and recognition go to all players.

Today’s money is created from debt

Did you know that our present money is primarily created from debt? In a simplified manner we can imagine it as follows: two people each have a bank account with nothing in either account. They make a deal with each other and then one of them transfers €100 to the other. After that one has a credit of €100 on their account and the other has a debit balance of €100. In this way money which did not previously exist has been created.

The technical term for this is scriptural money creation. If the two people were to make a counter-transaction of an equal amount the accounts would be balanced again and the money which had just been created would disappear. We could also imagine that a large number of people participate in the market and that the transactions more or less offset each other. So it is a perfect payment system?

Some people will be more successful on the market than others. This will lead to more and more money being concentrated in their accounts while the others have the related debts. In this system the wealth of one person always means debts for many others. Yes, it even means that economic activity is only possible with debts. And as the successful people constantly improve their skills and thus take in even more money, the concentration of money becomes greater all the time.

Now some of the people who have up to now been less successful might have the idea of also improving their skills so as to gain money for their own purposes. One or other of them may succeed in doing this after expending great efforts. We read about such people in the famous success stories. But the large majority cannot succeed in this on account of the system. For the system of debt money requires the majority to have debts to offset the assets of the few. To conceal this fact nations bear the debts on behalf of their citizens. Virtually all nations are indebted, even and particularly the rich countries. And more than two-thirds of the world population live below the poverty line.

The great wealth of this world is concentrated on a small number of super-rich families. But before we get the idea of blaming these families, we must not forget that we are all players in this big game. If these few super-rich families did not exist, there would always be some people who were cleverer than others and would exploit the money streams for their own purposes. The situation would be just the same as now and only the names of the super-rich would be different. For the situation we are experiencing at the moment is the logical consequence of a monetary system which creates money from debt.

It is often claimed that the present state of affairs came about because of interest and compound interest. It is true that interest and compound interest reinforce the development but the current situation would also have arisen without the introduction of interest. Don’t let us fool ourselves: there are countries where it is forbidden to charge interest. But in these countries as well there are a few super-rich people and a large number of poor people. Interest and compound interest are not the »main mistakes of the monetary system«. They merely reinforce the logical consequences which are bound to occur in any system of creating money through borrowing.

“If that was indeed the case,“ I can hear you saying now, “almost everybody must have debts on their bank account. But particularly the poorest of the poor do not even have a bank account.” You are absolutely right, dear reader. But I already mentioned that the nations have assumed the debts for their citizens. It was not possible for them to do otherwise, for mathematics requires them to do so.  That is the reason that virtually all nations of the world are highly indebted. In Germany we currently have a government debt of approximately 20,000 euros per capita. This means that even before a new-born baby can delight its parents with its first cry, it already has a debt of 20,000 euros.

In the course of its life it will have to service this debt by paying taxes and other levies. The largest part of the work done by a person goes to servicing a debt which they cannot even see on their account. Not only the taxes are high; the costs of servicing the debt are also hidden in the prices. For the companies get their money either from a bank or from shareholders, who expect an even higher return than what they would have got from a bank. In addition, there are the taxes that the companies themselves have to pay. Even if clever companies pay relatively little tax, they pay wages and salaries, on which there is a high tax.

You can live relatively well in this system if you have a good income. And in a welfare state like Germany even people without income from work can live – from welfare benefits. Social benefits are paid by the government, which thus has to incur additional debt or recoup the money through higher taxation. This, in turn, fires the envy debates which are well-known to us. But the social network is getting increasingly flimsy in countries such as Germany, not to mention poor countries.

Let’s have a brief look at the so-called »good« incomes. In this context good means »more than average«. There is an enormous explosive force inherent in the small word »more«, for having more than average means that the majority have less. This would not be bad in principle. People are different and also have different needs. But when you have to have more than others just to be able to lead a reasonably agreeable life, it means that the majority cannot lead agreeable lives. And since everybody has the natural interest to lead an agreeable life, conflict is pre-programmed as »competition«.

Let’s summarise what has been said so far:

• Our money is mainly created through debt.
• Since some people use their money more cleverly than others, more and more money is concentrated on the few, while the remaining many have to share the debts, either in the form of private debt or governments debt.
• This leads to increasingly fierce competition among people.

 

Chapter 2.2 – Freegaia

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

We approached a solar system and soon it was floating in front of us - Freegaia, a wonderful blue planet, quite similar to our earth. We gently dived into the atmosphere and landed in the middle of a magnificent park, similar to a huge garden. The plants emanated an indescribably delicious scent. Now and then a small space vehicle flitted by almost noiselessly above our heads.

But there in the middle of the plants were houses. They did not look like our houses; they fitted into their natural surroundings in such a way that from a distance they were not recognisable as houses at all. The people we encountered all greeted us in a friendly manner. They appeared to be happy. Humans and nature were living together in harmony.

“How did you manage to achieve this? Can you tell me something about your technology?”

“Technology was never a problem,“ said Very. “The problem that needed to be solved lay in the inhabitants’ thinking and in the economy. Because their way of thinking focused on scarcity our ancestors had thought out an economic system marked by competition. Now our life together and also our economy is characterised by abundance, wealth and love of nature and everything that exists.”

Very gave me a short outline of the history of his planet

“Quite a long time ago some robbing and murdering carnivores – Romucas – increasingly took over power by killing weaker people and depriving them of their livelihood through the force of their martial superiority. To prevent the Romucas eating themselves up, huge books of laws regulating every little thing were written. For the Romucas’ intelligence und ethics were not sufficient for a peaceful life together. In these books of laws there were instructions such as »You shall not kill«. The Romucas had to be explicitly told this! During the Romucas’ raids these laws were either suspended or their opponents were defined as “wild people” who needed to be missionized or exterminated. After their raids the Romucas introduced the same Romuca law for everybody. In this way stability was created and the new power structure was cemented.

The Romucas’ main illusion was their thinking based on scarcity. Seemingly there wasn’t enough there for everybody. So their favourite occupation was fighting or competition. There had to be winners and losers. As killing was forbidden and most of the “wild people” had already been killed or missionized anyway, ambitious Romucas shifted their activities to other fields, such as the economy, sport and games. In sport and games they were able to live out their competition in a relatively harmless way. In the economy, on the other hand, Romucaism led to more and more social injustice. The gap between poor and rich became greater and greater.

On Freegaia there had always been people who observed nature and sought to fathom its laws.

In early times these people had been burnt as heretics. But later when they let their knowledge be used for military purposes they were called scientists. Observers of nature who did not make any discoveries useful to the military were called charlatans and subjected to ridicule.

Over time the climate become more liberal and more and more nations converted to democracy. Shortly before the beginning of the New Age the observations of the scientists and charlatans started to correlate more and more. Analogies were found between natural sciences, philosophy and religions. People started to translate this knowledge to politics and economics. 

Comparison of the economy and nature

Nature produces food from herself and gives it to her living creatures. When nature is in order, abundance prevails, i.e. there is more food available than is needed. Food is perishable and can only be stored for a certain amount of time.

In nature there are no debts and no interest is charged. That’s why it doesn’t occur to plants and animals to hoard more than they need. Because of that there are no  »rich« and »poor« plants or animals.

And another thing: whether and how hard animals work for their food is very different from one form of life to another. Every animal living in the wild behaves in accordance with its nature. If you want an animal in captivity to work, you have to goad it all the time. No animal would fight for a »right to work«.

At that time people didn’t receive any basic income. Although the governments required their citizens to pay tax, they had such a big shortage of money that they had to borrow again and again each year. Great attention was paid to monetary stability but they seldom managed to achieve this. Money was created from debt and there was a system of charging interest. Both the assets and the debts got higher and higher. The citizens did all they could to accumulate money. The rich got richer and richer and the poor got poorer and poorer.

As far as work was concerned, most people did similar work, which was rarely in harmony with their natures. Although they disliked doing these jobs so alien to their natures, they had previously fought hard for the right to work. In spite of this right, large parts of the population were unemployed. On the other side, there was a surplus of goods and services.

The economy behaved in a way exactly contrary to nature. So we had to reverse our economic practice and bring it into harmony with nature. This realisation was the key to worldwide prosperity.

We thus developed our new economic model that today is practised on the entire planet and brings riches and happiness to all those involved: it is the Natural Economy of Life.”

Chapter 3.4 – No creation of money through debt

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

»In nature there are no debts and no interest is charged. That’s why it doesn’t occur to plants and animals to hoard more than they need. Because of that there are no  »rich« and »poor« plants or animals«.    

– Joytopia

Have you ever wondered where money actually comes from? How was it created? Does it simply come from the cash dispenser like electricity from the socket? Did a creator make it in some prehistoric time as God created the world? And who created the debts?

There is a touch of mysticism about money. And so it is no wonder that only very few people know how money is created. »Money creation« is a term from the world of finance. It describes the process by which money comes into being. And indeed it is now something mystical since today’s money is often called fiat money. This has nothing to do with the car make of the same name but refers to the Bible: in Genesis, the first book of the Bible, God said in Latin »Fiat lux!«, which means »Let there be light!«. And there was light, as we learnt in our religious instruction lessons. Today’s creator gods say »Fiat money!«, or »Let there be money!« And they create money from borrowing or debt.

Fiat money signifies »money from nothing«. A small part of it is created by the central banks and the greatest part by the commercial banks. In the bank balance sheet the total of all accounts has to be »zero«. Expressed differently, the total credit balances have to be equal to the total debts.

How does the creation of money from nothing work? Imagine that you and I both have a zero amount of euros on our bank accounts. We have absolutely no money at all. Although neither of us has any money, you buy books from me to give to your friends because you would like to pass on the valuable knowledge about the Natural Economy of Life. As you are an honest person, you transfer a hundred euros to my account. I am now the happy owner of a credit balance of one hundred euros: and you unfortunately have a debt of one hundred euros to the bank.

What has just happened? Money was created from nothing – through debt! Inside the bank the procedure is in fact slightly more complex but for us »non-bankers« (that’s what banks call people like you and me) only what goes in and what goes out counts. Nothing goes in and assets and debts come out.

Who has created the money then? The central bank? Its bank director? The friendly bank clerk who looks after your current account? The bank computer? The answer is hard but clear: you have created money, thus burdening yourself with debt. You wanted to do something good, support a project, inform your friends, make the world a bit better and in doing so have got yourself into debt!

»Yes, but only because I didn’t have any money. You should only spend what you have.« This – or something similar – is what you may be thinking now. But can this rule be kept at all in a system where money is created through debt? For every credit in euros there has to be a debit somewhere else. If you have no debt someone else has. There is no other possibility in our system. So that it does not come to people’s attention our governments have assumed the debts on behalf of their citizens. In Germany that currently makes 20,000 euros in government debt per person. Virtually all nations worldwide have enormous debts and many of them are on the verge of bankruptcy.

Such a system cannot function at all – least of all when we consider the threefold good for there it fails on all three levels. The good of the individual is diminished since you either have debts or have helped to create other people’s debts. The good of the community is at risk on account of the high government debts with the risk of state bankruptcy. Today the entire international community is affected. And finally the good of the big scheme of things is negatively impacted since highly competitive markets do not shrink from waging wars and destroying the environment.

A system of creating money from debt harms everybody and benefits nobody.

Interest and compound interest further aggravate the problem. But even interest-free monetary systems have the harmful impact described. Well-meaning alternative monetary systems, such as barter clubs and exchanges, LETS systems and suchlike are also included in this category. Regional currencies, which are tied to the national currency, cannot be considered as solutions for this very reason.

»It is beyond doubt that the good is always the bad that you cease to do«.

– Wilhelm Busch

German humorist, poet and graphic artist

In the following sections you will get to know a monetary and economic model which does not create money from debt but from life itself. It is constructed in such a way that everyone benefits and nobody is harmed.

And it is based on a principle which should be a matter of course for a civilised species…

Advantage 2 – No creation of money through debt

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

»Banks are more dangerous than standing armies.«

– Thomas Jefferson

3rd President of the USA

We have already several times pointed out the devastating disadvantages that result from creating money through borrowing or debt. Alone the fact that debt is absolutely necessary to create money is already sick: humankind is split into creditors and debtors, often even before birth.

Nowhere in nature is there such a cynical system so contemptuous of life. On the contrary, debts are unknown to nature which practises a gift economy. When you consider that almost all our economic problems today are due to creating money through borrowing or debt, a monetary model that manages without creating money through borrowing is an imperative requirement for the survival of humankind. For nature knows very well how to deal with behaviour hostile to life: a species that continually behaves in a way hostile to life becomes extinct.

Elimination of disadvantages is frequently already a big advantage, as it is here, too. By doing away with incentives hostile to life we give behaviour friendly to life the necessary air to breathe. Healing can take place when we do not split humanity into two camps in a schizophrenic manner. Humans can act together again and direct their attention towards joint survival.

A species hostile to life then becomes one friendly to life that cooperates with nature. As such we will get the right and the chance to thrive in a sustainable manner. The new incentives friendly to life motivate us to consider the threefold good in all our decisions – the good of the individual, the good of the community and the good of the big scheme of things.