Money:%20Capital%20or%20anti-capital?

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Money Capital or anti-capital?

• From speculation whirlpools to Burlington Bread,
  the impact of money on sustainable community
  development

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Outline

• What is money?
• Is the existing system for money creation just?
• How can speculative investment (in contrast to
  productive investment) undermine community
  development?
• What is an alternative?

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I. What is Money?

• Medium of exchange
• Store of value
• Unit of account
• What backs up the dollar?

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A Short History of Money

• C commodity M money
• C-C
• Barter
• Coincidence of wants
• C-M-C
• Money as a medium of exchange
• Use value
• What happens when you amass more commodities than
  you can consume?

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A Short History of Money (cont.)

• M-C-M
• MgtM
• Exchange value
• What happens when you amass more money than you
  can consume?
• Money fetish
• Money as a store of value
• M-M
• Speculation
• Overwhelms the buying of real goods and services
• What is produced?
• Redistribution

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How is new money created?

• When the economy grows, more money is needed to
  chase more good and services
• Seigniorage
• Difference between value of money and cost of
  printing it
• What percent of your purchases are with cash?

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How is new money created?

• Credit and reserve requirements
• Reserve requirements bank must have cash to
  cover about 5 of deposits
• 100 dollar deposit allows bank to make 2000 in
  interest bearing loans

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Money creation by banks
Money is destroyed When bank is repaid
interest
Do Banks Create the Value that Requires New Money?
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Interest payments and distribution
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Speculation

• Stock markets, real estate
• Speculative exchange in the global economy
• Buying and selling of goods and services is about
  30 trillion per year globally
• Buying and selling of paper is about 1.5-2
  trillion per day, or 500-700 trillion per year.
• Trading 1000/second, how long would it take to
  trade 2 trillion dollars?
• How long has this been going on?

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Speculation and instability

• Financial bubbles Loans to purchase stocks, real
  estate
• Positive feedback loops
• International speculative flows
• Rate of change and our understanding of the
  economy
• Herd behavior
• Tequila crisis, Asian flu, etc.

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Speculators may do no harm as bubbles on a
steady stream of enterprise. But the position is
serious when enterprise becomes the bubble on a
whirlpool of speculation. When the capital
development of a country becomes a by-product of
the activities of a casino, the job is likely to
be ill-done. -John Maynard Keynes
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Financial capital and natural capital

• What grows faster, trees in the forest, cod in
  the ocean, or money in the stock market?
• How do you maximize profits?

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Financial capital and human capital

• What happens to jobs when the stock market
  crashes?
• Great depression, tequila crisis, Asian flu

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Financial capital and social capital

• Social capital the norms and networks that
  enable collective action. Trust. Social cohesion
• Any links between speculation, income
  distribution and cohesion?
• Do you trust the speculators?

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Financial capital and built capital

• Investment in productive capacity might bring
  returns of 7/yr. when the economy is doing well,
  while the stock market might earn 16.
• Boom 90s and stock buy backs
• Financial contagions and the impact on built
  capital

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Community Currency

• Regaining community control over the power of
  money

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Why community currency?

• Cyclical nature of money creation
• The Great Depression
• Business cycles
• Example The Worgl
• Who creates the value in money?
• So who is entitled to seigniorage?

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How do they work?
IOU is destroyedor used again
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Seigniorage and Burlington Bread

• Seigniorage and complementary currencies
• Seignorage and public goods

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Goals of community currency

• Value goes to those who create it
• Community has control over money supply
• Interest free