The Hidden History of Money, Debt and Organized Religion

Debt the First 5,000 Years

David Graeber (2012)

In this presentation, anthropologist David Graeber talks about his 2012 book Debt: The First 5,000 Years

For me, the most interesting part of the talk is his discussion of the historical link between debt and the rise of the world’s major religions (Hinduism, Christianity, Confucianism, Islam, Buddhism, Judaism) between 500 BC and 600 AD.

As Graeber describes it, all commerce was based on credit prior to the development of coinage around 500 BC. In all societies, coinage arose in conjunction with the onset of empire building – traveling armies had to be paid in hard currency rather than credit. The result, according to Graeber, was the simultaneous rise of military/coinage/slavery* empires in Greece, China and India.

According to Graeber, all the major religions arose around the same time – as a “peace movement” opposing militarism, materialism and slavery.

Around 400 AD, when the Roman and other empires collapsed, coinage vanished, along with the standing armies that necessitated its creation. During the Middle Ages, nearly all financial transactions were based on credit. Until 1493, when the “discovery” of the New World initiated a new cycle of empire building, accompanied by militarism, coinage and slavery.

I was also intrigued to learn that Adam Smith stole most of his thinking about free markets from medieval Islamic philosophers. The Islamic ban on usury enabled the Muslim world to operate pure free markets that were totally outside of government influence or control. Trying to operate an economy without such a ban (or a system of debt forgiveness like the Biblical practice of Jubilee) leads to inevitable economic chaos and ultimately collapse, even with government intervention.

People who like this talk will also really like a series Graeber recently produced for BBC4 radio entitled Promises, Promises: The History of Debt.  In it, Graeber explores  the link between Native American genocide and the harsh debt obligations imposed on the Conquistadors.  He also discusses the formation of the Bank of England in 1694, the role of paper money as circulating government debt and the insanity of striving for government surpluses.

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* In ancient times, the primary mechanism by which people became enslaved was non-payment of debt.

 

 

 

Financial Exploitation of Communities of Color

Dream 2015 is a shocking new report describing the systematic impoverishment of people of color. By denying them access to banking services (eg checking accounts to cash their pay checks), Wall Street forces them to rely on fringe financial services, such as check cashing outlets, payday loans and auto title lenders. As Robert Manning writes in Credit Card Nation, many of these predatory outlets are owned by the big banks. Charting interest rates as high as 730% a year, they siphon off $103 billion annually from desperately poor communities.

In 2014, 16.7 million Americans were “unbanked,” ie had no access whatsoever to banking services. Another 50.9 million were “underbanked.” The “underbanked” typically have a checking account but lack access to small dollar loans and other banking services.

A total of 53.6% of black households and a total of 46.4% of Latino households are unbanked or underbanked. The most common reasons given are the absence of full service banks in communities of color and insufficient income to meet minimum balance requirements and overdraft fees. Ninety-three percent of all bank branch closings in 2008 were in zip codes with below median income.

Dream 2015 proposes a number of practical solutions to a problem that clearly plays a major role in growing poverty and income inequality. Among other potential solutions, they propose

• Enacting federal legislation capping interest and limiting the size and length of payday loans. Seventeen states have anti-usury laws, but according to Manning, fringe financial companies evade these laws by incorporating in states that don’t have caps. An existing federal law prohibits lenders from charging military personnel more than 36% annual interest – this protection needs to be extended to all Americans.
• Strengthening the Community Reinvestment Act to require all banks to provide small dollar loans to the communities they serve.
• Strengthening the Consumer Financing Protection Bureau.
• Strengthening public-private partnerships such as Bank On and Lending Circles  that provide microlending* services to communities of color.
• Modernizing US electronic payment technology. In the US electronic transfers take three to five business days to be credited to the recipient bank account. In most other countries (including New Zealand and Mexico), electronic transfers take at most a few hours.
• Expanding financial services at all 36,000 US post office branches to include checking, debt, savings and small loan services.

In my view, the latter is the most practical and easily implemented. Last year Senator Elizabeth Warren argued eloquently argued for it in the Huffington Post. There are post offices in most communities, regardless of income level, postal workers already get financial services training (because they sell money orders), and it would provide a new source of income now that digital communications are eroding the demand for snail mail service.

The US post office used to offer postal savings accounts between 1911 and 1917. They were phased out because they couldn’t compete with the higher interest rates banks offered (no longer an issue now that US banks pay less than 1% interest on savings).

Presently France, Germany, Japan, China, Brazil, India and New Zealand offer banking services in their post offices. New Zealand’s Kiwibank is a full service bank offering low cost credit and debit cards and mortgage loans in addition to checking and savings accounts. They also have some really clever TV ads.**

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*Microlending or microcredit is the extension of small loans to enterpreneurs too poor to qualify for traditional bank loans.

**The surly looking suits represent the Australian banks that own all but one of our private banks.

 

Economics to Save Our Civilization

(This is the eighth in a series of posts about ending the role of private banks in issuing money)

“Somewhere in our history we took a wrong turn and today we are reaping the consequences. If we don’t step back to evaluate the root causes of the rolling economic crises, our civilization is in danger of collapse.” – Clive Menzies

A few years back, Clive Menzies, president of British Fund Building and member of the Free Critical Thinking Institute entered into an ongoing dialogue with the London Occupy movement. The result is a radical monetary reform proposal to fix the global economic mess. In the video below, he is presenting it to the Chartered Institute for Securities and Investment (translation: a high-powered group of investment bankers and stock brokers).

In his presentation, Menzies attributes the current crisis, as well as capitalism’s recurrent boom and bust cycles, to the alienation of the vast majority of the global population from the commons (i.e. communal ownership of land and natural resources that ended with the Enclosure Acts) and the prohibition of any discussion of this catastrophic event in contemporary economic discourse. (This is a topic Fred Harrison discusses at length in The Traumatised Society.)

Most of Menzies’s talk focuses on the urgent need to abolish our current debt-based (bank-controlled) monetary system. For five main reasons:

• It drives systemic inequality by allowing those with more money than they need to exploit those who need money.
• It drives unsustainable, exponential debt growth because the interest cost rises faster than society can create wealth to pay it.
• It discounts the future, driving environmental destruction – it makes a forest worth more as sawed timber than as an ecosystem preserved for future generations.
• It demands exponential GDP growth, rapidly depleting finite resources – 3% GDP growth means the economy doubles every 24 years which means extracting resources at twice the rate and throwing twice as much away.
• It drives inflation.

He also demolishes the prevailing myth that a person’s existence on this planet is only justified by paid work. In a way it’s deliberate falsehood more than a myth. There is only enough “productive” work for 50% of the adult population and the vast majority of income in contemporary society is generated via “rent-seeking” (i.e. charging interest or rent or extracting and exploiting publicly owned natural resources).

Menzies lays out a monetary reform proposal that would abolish interest exploitation by the private banks who currently issue and control global currencies. Instead it would empower governments to issue interest-free sovereign currency.