usury - Village Magazine

36March 2015

POLITICS INTEREST RATES

March 2015 37

Negative Interest

Rates would

force investment,

redistribute wealth

and reduce debt.

By Peter Emerson

F you buy a house, you’ll have to

maintain it. Any car will have

to be insured. Jewellery is best

kept in a safe deposit. Works of

art also need to be protected. In

other words, being rich can be costly…

unless, that is, your wealth is in cash. For

if you go to a bank with, oh, €,,

and say please, please, please! look after

this for me, it will cost you nothing; in

fact, they’ll pay you!

The two words, ‘ecology’ and ‘econ-

omy,’ both start with ‘eco’ meaning

‘house.’ The similarity ends there – the

words mean the ‘study of’ and ‘manage-

ment of’ respectively – and if something

is ecological, it may well be aesthetic and

wise... but uneconomic. Take, for exam-

ple, a tree. A tree is beautiful, it certainly

serves good purpose, but it is worth

nothing, ﬁnancially, until, that is, like

wheat or barley, you cut it down.

Here’s another example. If I go to

work on my bicycle, I consume not, I

pollute not, and if I manage to avoid all

those car fumes, I keep ﬁt. Such a self-

ish act, however, does not help the Gross

Domestic Product, GDP, at all. If you, in

contrast, go by car, then you consume,

you pollute, and the GDP improves. Let

us now take the logic one stage further:

if, heaven forbid, you have an accident

and wrap yourself round a lamppost,

then you create employment for the

usury

Uninteresting

38March 2015

ambulance crew and the insurance com-

pany and the police and the garage and

the nurses and the lamppost factory

and… in a nutshell, while you languish

in hospital with your leg in traction, rest

assured, you have prompted a healthy

improvement in the GDP.

What a crazy way to run an economy…

and here’s another instance. The ecol-

ogist argues for more self-reliance. At

home, for example, I grow my own spuds;

then, every year, I put some aside to go to

seed, and the rest, over time, go into the

pot. In other words, year on year, I am

working (but getting no wage); harvest-

ing (but getting no income); investing

(without spending money); in a word,

I’m being ecological. Economists do not

measure these activities because they

can’t: no money is involved.

An economy based on debt

For many countries in Africa and

elsewhere, one pressing priority is

self-suﬃciency in food; a big part of

the problem, therefore, is current

ﬁscal policy, for the latter promotes

dependency, the very opposite. Just to

demonstrate the point, here in Ireland,

most two-year old children know what

a banana is, even though it comes from

, miles away; but most -year-

olds don’t know what a loganberry is,

even though it is indigenous. We could

grow loganberries, but we don’t; we

can’t grow bananas, and we have allowed

ourselves to become dependent on the

multi-nationals concerned.

We are independent politically, per-

haps, but not economically, and not least

because we’re in debt. As are most coun-

tries. Ireland, of course, has the bailout.

Things do not look good for Greece. The

UK is up to its ears. Despite its reserves,

China is in serious trouble with its debt-

based economy, and so it goes on: most

developed and many developing econo-

mies are in the red; many former Soviet

countries are struggling; and underde-

veloped nations are even worse oﬀ. So

who’s in credit? Well, a few countries

like Saudi Arabia, Qatar and Monaco are

wallowing in the black (gold) but, on bal-

ance, the world is a debtor. So who, I ask

again, is the creditor? Mars?

Well, whenever a country is in trou-

ble, it borrows from the bank. If, later

on, the bank gets into trouble, then the

country, even though it is already in

debt, might provide a rescue operation

to the bank by borrowing money… from

the bank. Now admittedly, the ﬁrst bank

might not be the same as the second, but

even so, they’re all lending to each other.

In short, it is, yet again, a crazy way to

run the economy!

Gambling or speculation

At the moment, then, the world is in a

mess. And it’s getting worse. The rich

are getting even richer. If you and I go to

the races, then you might win a few bob

and I might lose; but the day is zero-sum.

When the rich play games, however, they

can’t lose: it’s win-win. They put their

money in the bank, in yen perhaps, and

it earns interest; they may take a gamble

and switch it over to yuan, or dollars

or whatever, but it still earns interest.

Then, if the currency appreciates, they

get a second prize. And the poor who

aren’t even playing are the losers; the

world, after all, is zero-sum. The bank-

ers pretend it is not by using the phrase

‘wealth creation.’

Furthermore, when you are really

really rich, you can begin to actually

control the currencies. Taking £Xtril-

lion out of sterling causes a ﬂutter; the

price drops; the market begins to panic;

and the price tumbles. So now, via your

various companies based in some oﬀ-

shore tax haven like the Cayman Islands

and operated by those nice people in

HSBC in Geneva, you put your money

back into sterling. As a result, conﬁ-

dence is restored; the price improves…

and you make a fortune from your for-

tune so you go laughing all the way to

the bank… where you are already. Even

if such speculation is small its whole ten-

dency is to achieve this eﬀect – it’s the

essence of the way markets work.

Furthermore, if your timing is clever,

the rise in the value of the currency

means the political party you support

will win that vital next election. This

partly explains why, generally speak-

ing, business tends to support not only

the more right-wing parties, but also

the current adversarial political system

itself. On the scale writ small, in the

board room for example, they might try

to achieve a verbal consensus; when the

going gets serious, however, as in poli-

tics so too in business, majoritarianism

takes over: it is the majority stakeholder

who dominates, and the majority vote

which dictates at the AGM.

Negative interest rates

Pa rt of t he solut ion to t he se i ne ﬃc iencies

and injustices could be negative interest

rates. Money in a bank is a lodgement,

not an investment. An investment, as it

were by deﬁnition, must be for a ﬁxed

minimum period: ﬁve years, say, will

get a small return, ten or more will pay

a better rate.

In other words, if you’re rich, any mere

lodgement will cost you. No matter what

your wealth – a home, a ca r, jeweller y, ar t

or cash – it will be expensive. €,

in the bank will be worth, let us say,

€, after one year; about €,

after two, and so on. By the time you’re

, there might not be much left; so,

if you want to do something with it, use

it – (a) invest it, (b) start a business, or

whatever, and the sooner the better. In

time, if (a) the investment pays oﬀ, you

may get interest plus dividend plus an

increase in the share price (sharehold-

ers like to both have and eat their cakes);

or (b), if the business is successful, then

proﬁts will begin to accumulate.

If, however, your money is just sitting

in the bank, a mere lodgement being

transferred perhaps from one cur-

rency to another, from one commodity

to another, from one futures market to

another, then it is not an investment, it

is a lodgement if not indeed a specula-

tion. So each transfer should be subject

to a Tobin tax, of course, and until such

deposits become investments, these

lodgements should be subject to nega-

tive interest rates.

Such a policy would have immediate

beneﬁcial eﬀects. It would help to redis-

tribute wealth. It would mean that money

would be cheaper to borrow, so reducing

Greece’s debt burden, for example, not

to mention our own. It could be part of a

broader ﬁscal reform in which GDP – or

Gross Domestic Happiness, as they say

in Bhutan – could be recalculated on the

basis that the annual budget includes not

just cash but ﬁnite reserves in the earth

and/or territorial waters as well, things

like trees and oil deposits. This will help

ensure, if we do extract part of ‘our’ min-

eral wealth, that we do so responsibly;

that we do not take without taking care,

to use Naomi Klein’s phrase. Maybe

then, the two words – ecology and econ-

omy – would be similar.

In summary, negative interest rates

would help return the world to the situ-

ation in which usury was not regarded

as a virtue named credit but, as was (and

sometimes still is) the case according to

Jewish, Christian and Moslem beliefs,

was held to be a vice, a sin. •

Peter Emerson, www.deborda.org

POLITICS INTEREST RATES

It would help

to redistribute

wealth, reduce

debt and

could be part

of a broader

ﬁscal reform

in which Gross

Domestic

Happiness

and the

environment

supersede GDP

“