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Ekodo: Interest

Submitted by on April 6, 2011 – 8:00 am One Comment

By Sean Weaver

“But all this talk about sustainable economic activity delivered with clever instruments, designed to reduce emissions at least cost and so on – it is all still based on an ever expanding economy. And this growing economy just uses more and more energy. I am not sure what my question is but I cannot get past this point.”

The lighting was still flickering and the lecture still had another 10 minutes to run. He stood at the lectern exhausted from travelling and back-to-back meetings, and searched the microseconds available for a meaningful reply, as the last act at the end of a long and tiresome day.

She is right. It all boils down to growth and growth boils down to energy consumption. And energy consumption is dominated by fossil fuels, and will be for the foreseeable future…

Just like the endless radio commentary about opportunities arising from the Rugby World Cup – to grow the economy on the back of punters who will flock here to disgorge their foreign currency on over-priced hotel rooms scented with the aroma of new paint, fast and slow food from stressed overworked kitchens, and waterfalls of alcohol cascading from Dionysian wellsprings high in the mountains of strategic investment.

Why, oh why the obsession with growth and the dollar?

Caught in her headlights like a naked possum he struggled to find an answer that would do justice to the question of all questions at this twilight of the industrial revolution.

“Banking reform.”

Huh?

We are obsessed with economic growth because we are locked into a money supply system based on usury – charging interest on borrowing. Because the majority of the money in circulation (over 90%) is borrowed, the economy must grow by the interest rate in order for the finance system to remain stable. This is because borrowers need to manage their own incomes to keep up with interest payments (e.g. mortgages).

If the economy does not grow by the interest rate, we get inflation. Under these conditions (e.g. when oil prices escalate in coming years) we will also have borrowers who cannot afford to service the interest on their loans, and this will be followed by defaults and foreclosures. When banks cannot make money from interest payments (because too many of their customers cannot afford to pay their interest) they go out of business. If they are lucky (or big enough), governments bail them out with taxpayer funds to prop up an unsustainable system of finance.

“So, we are all working in the service of the modern banking system?”

“Yep. And our planet and our future are threatened by this financing system because it functions only if we use resources unsustainably, by incessantly trying to grow the economy by the interest rate every year, indefinitely.”

The time to begin a considered public dialogue on banking reform is long overdue.

We have examples of interest free finance. One example is Islamic banking where charging of interest is forbidden and alternative debt and equity systems are used. The prohibition against charging interest on loans (Arabic: riba; Hebrew: ribbit; English: usury) is shared by Judaism, Islam and Christianity but is far less common in modern times (apart from Islamic banking which is alive and well in many Islamic countries). A Western example is the JAK Members Bank of contemporary interest-free banking in Sweden.

Another example is time banking – community run, interest-free currency systems that by-pass the formal economy, and facilitate trade in goods and services out here in the real world.

“If I asked what is the keystone of a sustainable society – what would be your answer?”

“Neither a borrower nor a lender be.

For loan oft loses both itself and friend,

And borrowing dulls the edge of husbandry.

This above all: to thine own self be true,

And it must follow, as the night the day,

Thou canst not then be false to anyone.”

William Shakespeare, “Hamlet”, Act 1 scene 3


Sean Weaver and his wife Jo Campbell founded and host Ekodo (pronounced “ecodaw”) – a life-skills programme for compassionate agents of change. They live now in Golden Bay, New Zealand.

Sean works for himself as a climate change solutions consultant through his business Carbon Partnership. Jo is an artist and environmental educator.

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One Comment »

  • Armin says:

    Not sure about that simplified reasoning re Interest rate and inflation that you give. BUT that the core ofour problem is the banking and shareholder system that we have developped has become more and more clear to me.
    They work!
    They create huge advantages!
    We could not survive a single week w/o them!

    And they are killing us!

    We got locked into a system that has turned from servant to master, as they do….
    And NO ONE will reform it! It is not possible to reform it in such a way that it loses its bite, bc. it is the very foundation of our society.
    The word and concept you need to look at are “Lock-in”.
    Imo the only way for it to change is for it to break down.

    And that is going to be devastating.

    Cheers, let the sun shine in your heart.

    Armin

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