[CARVER]

From The Future of Money by Bernard Lietaer:
$this->bbcode_second_pass_quote('', 'T')hree consequences of the way interest is built into the current money system:

1) Interest indirectly encourages systematic competition among the participants in the system.

2) Interest continually fuels the need for endless economic growth, even when actual standards of living remain stagnant.

3) Interest concentrates wealth by taxing the vast majority in favour of a small minority.

...

Indefinately compounded interest in the material world is a mathematical impossibility.

...

Was it the concern for social justice and stability that previously motivated all three major religions - Judaism, Christianity, and Islam - unanimously to prohibit the practice of charging interest? It is intriguing that after interest became officially legal, almost all countries have felt the need to create income redistribution schemes to counteract at least part of this process. Some of them, such as the welfare system and progressive taxation, are increasingly being criticized for their ineffectiveness. Is this the fault of the overly efficient money system, or of the inefficient redistribution schemes? Or both?

[hotsacks]

$this->bbcode_second_pass_quote('MrBill', '')$this->bbcode_second_pass_quote('hotsacks', '"')Interest rates are the product of inflation".
I would argue that interest rates,rather than being an equitable device,are the most effcient means of increasing capital,the lender assuming next to no risk or responsibility for the outcome of a transaction.The current credit practises of banks bear this out.JD pointed out the Islamist system involves the lender in the results of a transaction.It seems plain this would nurture caution on the creditor side,and slow growth.

[Doly]

$this->bbcode_second_pass_quote('', '
')You cannot abolish interest. Interest is a natural outcome of human behavior.

[MrBill]

That is a pretty tall order.

First of all I applaud Carver for his convictions, but I do not think an alternative currency is necessary. For one, we already have competition between currencies, so we have alternatives. In many countries with 'soft' currencies, local goods & services are priced and actively trade in the home currency. This is similar to an alternative to the dollar or euro which is a 'hard' currency and used for buying imports into the economy. Correct me if I am wrong? Both currencies work in parallel and if one or the other gets out of line than the imbalance is corrected either with a) buying/selling in the FX markets, b) domestic inflation or deflation, c) a revaluation.


Debit and credit cards are simply a marketing gimmick. Consumers can also prepay their cards or use a pre-paid card. Contrary to popular belief access to credit is a privilege not a right. If interest rates on credit cards are too high. Don't use them or pay them off on time. They were never designed to be a form of welfare or income transfer. The banks also have to absorb bad debts when they extend credit cards to lower income earners. My advice is to buy shares in banks or buy credit card backed securities (ABS) if you think this is a free ride with no risks.


As for the last question about curtailing growth I can think of some ways. My comments may be geared here to the US market. It is hard to give a one size fits all response.

I would decrease consumption by raising taxes, eliminating the budget deficit, permantly decreasing the nations debt, putting a fuel surcharge on all carbon based fuels and use the money raised to fund alternatives. No energy taxes can or should be used to build roads or fund general budget outlays or wealth transfers.

I would eliminate all deductions for any reason. Preferably I would have a flat tax. Perhaps first of all with some tax credits for lower income earners, but they would be phased out as well. I would pass laws to make deficit budgets illegal (perhaps over a term of say four years).

I would increase the minimum reserve requirements that banks have to pay to the Federal reserve. There would be no exceptions for off-balance sheet items. All financial institutions would be supervised and regulated the same. No hedge funds, no banks, no insurance cos., no mutual fund exemptions or special treatment. I would make capital gains, interest income and corporate taxes all at the same rate to curb financial engineering.

I would make consumers fund the full cost of all consumables they use including recycling and land reclamation. This would end the use of limited liability companies where the environment is concerned. Performance bonds for reclamation would have to be posted in advance.

I would abolish all pay as you go systems like Medicare and pensions. All future liabilities have to be fully funded. Companies cannot use surplus funds from their pension accounts as profits but must be reinvested. I would eliminate any interest expense deduction on private homes. I would impose road taxes charged by distance driven and vehicle weight.

Government would get out of the income redistribution game except for emergency relief and administering certain safety net programs. That would preclude paying any subsidies to business. Public works projects or public R&D would have to be clearly defined. Government would be consigned to supervision, regulation, public safety, etc. as well as ensuring the health and safety of its citizens through national defence and guarding national borders. Company officers would become legally liable for any corporate malfeance.

Well, I think most of these measures would go a great way to curtailing demand without interferring in the economy or the way it works. Of course, it would also cause a recession/depression and be hard to implement, but over time it would strengthen the economy. One hard part would be to impose import duties on goods entering the country to cover (only) the cost of recycling so that imports compete fairly with domestically produced goods.

That is the short answer. I am sure we could debate each point in isolation. Some may see it as draconian, but really the system the way it works now is far more bizarre.

[MrBill]

Utility Defaults on $17Bln Debt

$this->bbcode_second_pass_quote('', 'U')tility Defaults on $17Bln Debt

By Leonard Anderson and Michael Erman
Reuters
SAN FRANCISCO / NEW YORK -- Embattled U.S. power producer Calpine filed for bankruptcy late on Tuesday, weighed down by $17 billion in debt and court battles with creditors over how to use its cash.

Calpine, squeezed by a credit crunch and a weak merchant power market that resulted from the collapse of Enron and the California energy crisis in 2000-01, said it filed petitions to restructure under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of New York in Manhattan.

Calpine, which listed assets of $26.6 billion, said many of its subsidiaries also filed for bankruptcy.

Of the creditors holding the 80 largest unsecured claims, Wilmington Trust is trustee for the six largest positions -- notes worth more than $4.5 billion.

Analysts said a bankruptcy filing had been likely after a Delaware court ordered Calpine to repay $312 million to creditors who challenged the company's use of proceeds from assets sales to buy natural gas to fuel its power plants. Calpine had said it was able to pay the money by a Jan. 22 deadline.

Calpine said it received commitments for up to $2 billion of secured debtor-in-possession financing from Deutsche Bank and Credit Suisse First Boston.

California energy market experts have suggested Calpine's bankruptcy would look in many ways like an airline insolvency -- its 3,300 workers would keep working, power plants would keep running, and operations would not be disrupted.

"Our plan calls for power plants to remain available for operation to provide reliable supplies of electricity," chief executive Robert May said in a statement. May, who helped steer recoveries at HealthSouth. and Charter Communications, took over the reins at Calpine on Dec. 12.

Calpine, based in San Jose, California, is a major supplier to the state's electricity grid, providing 5,250 megawatts of the grid's capacity.

On Monday, California Attorney General Bill Lockyer filed an emergency petition with the Federal Energy Regulatory Commission seeking to force Calpine to continue supplying electricity under long-term contracts with the state if Calpine goes bankrupt.

Calpine said it would continue to evaluate all opportunities to strengthen its balance sheet and improve its cash flow, including asset sales and reductions in operating and overhead costs.

Calpine went on a credit-fueled power plant building spree in the late 1990s, putting together one of the largest independent power systems in the U.S. But when electricity markets collapsed after the California power crisis and the Enron scandal, merchant generators like Calpine were hit with rising credit costs and declining prices for their electricity.

[Doly]

$this->bbcode_second_pass_quote('MrBill', '
')First of all I applaud Carver for his convictions, but I do not think an alternative currency is necessary. For one, we already have competition between currencies, so we have alternatives.

[MrBill]

$this->bbcode_second_pass_quote('Doly', '')$this->bbcode_second_pass_quote('MrBill', '
')First of all I applaud Carver for his convictions, but I do not think an alternative currency is necessary. For one, we already have competition between currencies, so we have alternatives.

[hotsacks]

I tend to agree,but with this caveat.
Mr Bill's proposals place the invoice for powerdown in the hands of the voters.They pay the freight.The wealthy would have to ante up more cash for services but they have the means to pay.Those who live in creditland,the majority,would have to live like peasants.The upshot would be political instability.This type of change would require an authoritarian state.
Why the resistance to capping interest rates? I can only think it comes from those who profit by them.Growth is good,to paraphrase Gekko.It's difficult to argue with success: free market monetary policy has made all of us in the western democracies relatively rich.The problem is the system worked too well.
It has been the fashion for a good while to scoff at moral objections to interest charges. A person who would charge for the use of money,and the person who would pay for the service,were once regarded as enslaved to each other.The old paradigm was based on a belief that hard work yielded a living,and that it was wrong to profit from another's labor."Neither a borrower nor a lender be." This antique philosophy was guided by the survival instinct to preserve balance in the workaday world, and to distrust easy wealth.It was a goatherder's POV.Populations fluctuated according to resource availability.With the advent of usury,money to follow one's dreams became available and goatherding fell out of fashion.Along with the goats went instinct and individualism.The shepherd now had another master than nature.His eye was fixed on growth:he had to make money to pay back the original debt plus interest.He tore up the earth and emptied its waters to do this.
I sketch this fable for its kernel of truth.Modern growth oriented societies are dependent on interest charges as the main instrument of raising capital.By tinkering with them,we might be able to adjust growth rates and to direct our attention to goals other than short term profits.I see no reason for an adjustment invoking collapse.It's apparent at this stage that trickledown isn't happening, and that wealth is more and more concentrated in the hands of a few.This fact alone argues for structural change,one that penalizes the haves more than the have nots unlike a flat tax.The wealthy will pull in their horns and sulk but the birds wil still sing,if any are left.

[JohnDenver]

$this->bbcode_second_pass_quote('MrBill', 'T')he stock market system above all demand growth. No growth, no dividend. Depositers don't want to put in 100% and take out 67% of their savings. Especially if they have no idea where that 33% went?

[Daryl]

$this->bbcode_second_pass_quote('JohnDenver', '(')P.S. You and Daryl are right about Islamic Banking. I looked into it more closely, and it is based on accounting tricks.)

[lakeweb]

$this->bbcode_second_pass_quote('MrBill', 'I')nterest rates are a product of inflation.

[lakeweb]

$this->bbcode_second_pass_quote('MrBill', 'I') would decrease consumption by raising taxes, eliminating the budget deficit, permantly decreasing the nations debt, putting a fuel surcharge on all carbon based fuels and use the money raised to fund alternatives. No energy taxes can or should be used to build roads or fund general budget outlays or wealth transfers.

[CARVER]

$this->bbcode_second_pass_quote('Doly', '.').. Money people take things as they are and try tinkering with them. If a little tinkering won't do, maybe lots of it.

[CARVER]

$this->bbcode_second_pass_quote('hotsacks', 'I')t's apparent at this stage that trickledown isn't happening, and that wealth is more and more concentrated in the hands of a few.This fact alone argues for structural change,one that penalizes the haves more than the have nots unlike a flat tax.

[MrBill]

$this->bbcode_second_pass_quote('CARVER', '')$this->bbcode_second_pass_quote('hotsacks', 'I')t's apparent at this stage that trickledown isn't happening, and that wealth is more and more concentrated in the hands of a few.This fact alone argues for structural change,one that penalizes the haves more than the have nots unlike a flat tax.

[Doly]

$this->bbcode_second_pass_quote('MrBill', 'S')mall, efficient government, supported by lower and simpler taxes. That should be the aim. That will create more employment than any alternative currency will.

[MrBill]

$this->bbcode_second_pass_quote('Doly', '')$this->bbcode_second_pass_quote('MrBill', 'S')mall, efficient government, supported by lower and simpler taxes. That should be the aim. That will create more employment than any alternative currency will.

[hotsacks]

",,,someone still is not getting it."
That would be me.May be my original argument was fatuous.I was thinking more along the lines indicated in lakeweb's post:that central banking is oligarchic and runs against the common sense proposition that the worker should profit in proportion to his/her work.Without quibbling about the meaning of'work',my thinking is that people who provide neccessities in societies are the real workers.Farmers,builders,mechanics;that sort of thing.Investment banking may be stressful but it produces nothing tangible except more capital for further investment.The oil markets right now are a good illustration of how speculation drives prices.Our lives are predicated on the guesswork of crystal ball gazers.We pay for goods in terms of perceived value,not real value.Currently,we perceive big homes and big cars to have great value;and basics like food to have little.
My question is: how did this BS start and how (if?) can we defang it?
I still hold that those who have profited the most with the least input of real value should be reined in.It seems the banking model in use is at the heart of the problem.
Thank you Mr.Bill for clarifying the effect of capping interest rates.

[MrBill]

$this->bbcode_second_pass_quote('hotsacks', '"'),,,someone still is not getting it."
That would be me.May be my original argument was fatuous.I was thinking more along the lines indicated in lakeweb's post:that central banking is oligarchic and runs against the common sense proposition that the worker should profit in proportion to his/her work.Without quibbling about the meaning of'work',my thinking is that people who provide neccessities in societies are the real workers.Farmers,builders,mechanics;that sort of thing.Investment banking may be stressful but it produces nothing tangible except more capital for further investment.The oil markets right now are a good illustration of how speculation drives prices.Our lives are predicated on the guesswork of crystal ball gazers.We pay for goods in terms of perceived value,not real value.Currently,we perceive big homes and big cars to have great value;and basics like food to have little.
My question is: how did this BS start and how (if?) can we defang it?
I still hold that those who have profited the most with the least input of real value should be reined in.It seems the banking model in use is at the heart of the problem.
Thank you Mr.Bill for clarifying the effect of capping interest rates.

[hotsacks]

$this->bbcode_second_pass_quote('MrBill', '')$this->bbcode_second_pass_quote('hotsacks', '"'),,,someone still is not getting it."
That would be me.May be my original argument was fatuous.I was thinking more along the lines indicated in lakeweb's post:that central banking is oligarchic and runs against the common sense proposition that the worker should profit in proportion to his/her work.Without quibbling about the meaning of'work',my thinking is that people who provide neccessities in societies are the real workers.Farmers,builders,mechanics;that sort of thing.Investment banking may be stressful but it produces nothing tangible except more capital for further investment.The oil markets right now are a good illustration of how speculation drives prices.Our lives are predicated on the guesswork of crystal ball gazers.We pay for goods in terms of perceived value,not real value.Currently,we perceive big homes and big cars to have great value;and basics like food to have little.
My question is: how did this BS start and how (if?) can we defang it?
I still hold that those who have profited the most with the least input of real value should be reined in.It seems the banking model in use is at the heart of the problem.
Thank you Mr.Bill for clarifying the effect of capping interest rates.