#5 If your life feels pressured, this could be why

I’ve just learnt something about money that is blowing my mind!

I’ve been learning about the money system for a while now and about how credit and debt drive the economy - for example through this animated explanation by Ray Dalio.

But the significance only began to dawn on me after talking to the amazing Helen Dew, an 85 year old Carterton resident, who’s a passionate advocate for alternative currencies.

“People hardly ever question the nature of money,” she told Kim Hill in her recent interview on National Radio. “How did money get into the system? Where did it come from originally? You know! People don’t ask about that and it’s critical. It’s the central nervous system of everything we do and we don’t even ask questions about it. It’s like a fish. You ask a fish, ‘how’s the water? And the fish says “what water?” you know. We swim in it and we don’t understand the nature of it and how it all works and supports us.”

“Money is the central nervous system of everything we do and we don’t even ask questions about it.”
Helen Dew

It took me a while to comprehend the fact that money is created out of nothing.

I was able to catch Helen on the phone and over a long conversation she explained to me how money is created out of thin air - mostly by banks.

“Say you borrow $300,000” she explained. “At the press of a button that $300,000 is created in the system - a debt and credit are recorded in the bank’s ledger - equal amounts. You get a contract and a schedule of repayment and when you pay it all back, the money is extinguished. That process is going on and on with lots of different people.”

This article by UK not-for-profit Positive Money explains the process in further detail. 

When I studied physics at university I learnt that energy is never created or destroyed. It’s only transformed from one form to another. For example, the chemical potential energy inside petrol is converted into movement, sound and heat energy when you drive a car. Energy conservation is one of the fundamental laws of the universe. This is not the way money works!

On top of the money we borrow, we also need to pay the bank interest.

The banks create money from nothing, then they ask us to pay more money for doing it.

This additional money (interest) is not in the system. For example, if you use your $300,000 to buy a house you’ll need to find that extra money to pay the interest. Where do you find it?

Helen explained that there are ultimately only three options to choose from:

1. We borrow more money to pay back the loan - that’s a vicious cycle
2. We employ nature’s resources to create something we can sell for money
3. We make money from people.

This system puts pressure on everyone. We all need to give back more money than has been created in the money system. We’re all walking around in debt. The only place we can draw on to pay that debt back is the earth, or the people around us.

“We pressure each other. We exploit each other. People go bankrupt. That’s built into the system. It’s nasty!”
Helen Dew 

Our money system is acting like a vacuum cleaner, sucking resources and energy from people and the earth.

This feels huge!!

The money system is not just highly pressured, it’s also fragile.

Watching Inside Job, the documentary explaining the 2008 global financial crisis, showed me how the deregulation of the banking system, along with the careless greed of a handful of individuals, could plunge billions of people into poverty overnight.

“Money is just a system of trust and hope. It’s very fragile. And it can fall over at any time and I think it’s in that process.”
Helen Dew

We often think of economics in a similar way to physics. It has so-called “laws” just like physics does. It’s complex and mathematical and the experts often make us feel that what they do is “too difficult for us to understand”. It gives economics a feeling of being a solid and immutable authority - as if it describes the nature of the universe itself.

But it doesn’t! Economics is not like physics. It was literally invented by a bunch of guys. It’s not even very old and yet it feels as permanent as gravity.

Economics is not neutral. It’s founded in beliefs of what it means to be human.

As Kate Raworth describes in her enlightening book “Doughnut Economics”, mainstream economic theory is based on the belief that humans are self-serving individuals with endless appetites - she calls the character at the heart of our system “rational economic man". The illustration below is from her book.

“Rational economic man stands at the heart of mainstream economic theory but the history of where he came from has been airbrushed from the textbooks. His portrait is painted in words and equations, not in pictures. If it were to be drawn, however, he would have to look something like this: standing alone, money in hand, calculator in head, and ego in heart.”
Kate Raworth, Doughnut economics

Rational economic man sounds a lot like a legendary monster I’ve just been reading called the Windigo who is cursed with an insatiable appetite. His huge figure stalks the deep winter nights with yellow fangs, stinky breath and a heart of ice looking for people to eat. One bite from the Windigo infects victims with the same curse. Robin Wall Kimmerer, the American biologist and indigenous storyteller, describes the Windigo in her wonderful book “Braiding Sweetgrass” by. She talks about how her Anishinaabe people told Windigo stories to warn people away from excessive greed.

“In the old times, individuals who endangered the community by taking too much for themselves were first counselled, then ostracised, and if the greed continued, they were eventually banished…

The fear for me is that the world has been turned inside out, the dark side made to seem light. Indulgent self-interest that our people once held to be monstrous is now celebrated as success. We are asked to admire what our people viewed as unforgivable.”
Robin Wall Kimmerer, Braiding Sweetgrass

We often find it easier to imagine the end of humanity than the end of capitalism.

A friend of mine shared this striking thought with me after reading my blog. Watching the news and seeing the devastation of climate change and loss of species we can feel such despair and stuckness that we imagine our whole species perishing, along with countless others, before our economic system changes.

Helen Dew is one person with the breadth of perspective and the optimism to believe that something else is possible. Since the early 2000s she has been investigating alternative economic systems that value community, reciprocity and the preciousness of the natural world. There is so much to explore in this field and next year I want to delve into this properly.

In her interview with Kim Hill she speaks about her passion for local currencies and her current project to get one started in her hometown of Carterton.

Alternative economies could help people out of debt.

The short film Our Money created by Luke Ross, and supported by Helen's organisation Living Economies, explains how interest-free alternative economies could help free communities from debt. Helen told me about savings pools, where groups of people pool their resources to offer each other interest-free loans. This idea originated in Denmark and spread to Sweden where groups of farmers were able to protect each other from going bankrupt through mutual support. She also spoke about time-banking where people trade their time to offer services in the community.

Until now, none of these systems have reached a scale to start relieving the financial pressure on most individuals and families, although they’ve offered a lot of support and sustenance to those involved.

Another conversation in the last few weeks has got me thinking that we could be on the verge of a breakthrough in scaling these ideas up. I was talking to my dear friend Jaime who has been researching crypto-currencies and DAOs (decentralised autonomous organisations). Like the language of physics and economics, the word “crypto” and “DAO” carry a sense of complexity and mystery. But it seems to me that these new technologies could be the missing link to making alternative economies accessible to ordinary people.

New technologies could provide a simple easy way to set up alternative currencies that are immune to inflation and can’t be taken over by a small group of individuals.

This could ease us out of our reliance on corporate banks and enable us to put our extra energy into projects that nurture our communities and environment.

It seems to me that there is a slight disconnect between the groups who are passionate and knowledgeable about alternative economies and those who are working on technologies that could offer a solution. This feels like an exciting bridge to help build.

Suffice to say, my mind is expanding. Along with a sense of shock at the way our current system works, I have a growing feeling of hope that we can create something new and better.

Book References

Kimmerer, R. W. (2015). Braiding sweetgrass. Milkweed Editions.

Raworth, K. (2017). Doughnut economics: seven ways to think like a 21st century economist. White River Junction, Vermont, Chelsea Green Publishing.