ON THIS PAGE: Incomes for All • Insecurity Causes Greed • Present Financial System Causes Greed and Destruction • Stable Population Levels • Declining Population Levels • Alternative Technologies • Other Uses of Interest-free Loans • Central Bank-issued Interest-free Loans for Environmental Capital and Other Projects • Footnotes
Incomes for All: Binary economics spreads productive (and the associated consuming) capacity so that all individuals in the population — including babies, carers and those not normally in conventional employment — have at least some form of secure, independent income. The income starts small and grows larger over time. A secure, reasonable income for everybody is essential if there is to be any hope of changing people’s attitudes towards excessive consumption.
Insecurity Causes Greed
At present virtually everyone has either had a scarring experience of poverty or has a perception or fear that they might fall into poverty. In short, people feel insecure and that is one of the main factors in explaining greed. The insecurity — and the associated aggressive consuming attitudes — will only disappear if, as in binary economics, ALL people have material security and, at the same time, all people in some degree earn in exactly the same way as do others (i.e. at least part of their individual income should come through capital ownership). Only then will there be hope of people voluntarily minimising their greed. Moreover, as between individual countries, fairness between populations is essential if there is to be willing co-operation.
Greed is also caused by the present financial system which creates sufficient money for the principal of interest-bearing loans to be repaid but does not create sufficient money with which to repay the interest. The result is that more interest-bearing money has to be created (with more inflation and more people going into debt) and more frenetic activity in the endeavor to try to make repayment.
Worse, the system favors the short term destruction of natural wealth rather than its long term maintenance.
Unless the role of interest in the financial system is substantially diminished (as happens with binary economics) not only is the environment at risk but so is the stability of the world financial system.
It is also the case that populations stabilise when there is a reasonable standard of living, good education, health and at least some status for women. Binary economics provides a reasonable standard of living, good education, health and full and equal status for women particularly by ensuring independent income. Thus binary economics is the only hope for moderating the present growth of the world’s population.
However, today, some economies (e.g., Japan, Italy, Korea, Germany) are showing signs of a population decline increasing over the next few decades. This stimulates panic headlines about not having enough workers etc.
But binary economics links everybody to productive capital (which creates the higher percentage of the wealth) and so has no fear of societies with reduced population.
Lastly, there is now an extraordinary range of ‘alternative’ green technologies capable of generating clean electricity but which cannot be used because, in the present system of interest-bearing money, they are not financially viable.
La Rance, France, tidal barrage power plant
Examples include tidal barrages and tidal lagoons; and large-scale solar structures.
There is now also hope that some technologies — at present viewed with varying degrees of skepticism by mainstream science and previously thought to be physically impossible — are practical. Indeed, there are many ‘alternative’ technologies that, in principle, would be eligible for research and development funding under binary economics.
Some of these technologies, if physically possible, would enable the clean generation of electricity for cars, houses, trains and factories and they can be found among the Top 100 Technologies which are a mixture of that which lies within, on the edge of, and outside existing science. An example is the use of magnetic interactions for clean electricity generation which does not require the input of any other energy (i.e. ‘free’ energy generation). Cars, houses, trains, factories could be powered by clean, ‘free’ magnetically-generated electricity. All of these technologies should be implemented with interest-free loans.
NB. A company — BrilliantLightPower — might be about to produce a powerful new clean electricity technology. Conventional physicists say the BLP method is impossible because it breaks the laws of physics. However, they omit asking the key question — does the BLP method actually work?
With present interest-bearing loan money, the planting of deciduous forests is costly. But it would not be so with interest-free loans.
Moreover, miles of sea barrage can be covered by mangrove forest. With interest-free loans they become viable.
The 2007 document below succinctly sets out the binary environmental case.
Under the present financial system, adapting to climate change in the developing world (and elsewhere) will cost billions of dollars per year. Thus a new, reliable, effective and non-inflationary financial mechanism is urgently required.
Scope of the proposal
The proposal covers all environmental capital projects, all governmental capital projects, and micro-credit. Moreover, it is capable of being extended to small business, the private sector (if wide ownership is involved), student loans and, crucially, to the development of new alternative technologies particularly for the clean generation of electricity.
Structure of the proposal
The banking system, using the fractional reserve system, today creates money out of nothing, adds compound interest and does not necessarily direct it at the development and spreading of productive (and the associated purchasing) capacity. In the UK and USA over 95% of the new money supply is created in this way.
It is proposed that a country’s central bank should create interest-free loans. (Such loans could also come from the IMF, World Bank, individual countries or the Islamic ummah). On repayment, the loans (like the principal of normal bank loans) are cancelled leaving the capital projects in existence.
The money for repayment of loans would be collected and repaid as it is at present except that the capital projects would cost, roughly, half or less what they cost today.
The collateral for the loan would be similar to that today e.g., either secured on the project itself or on the repaying power of the government and its administrative systems. Essentially, the government would be repaying itself thereby removing creative liquidity which has fulfilled its function.
In the past the mechanism has been successfully used for public capital projects in Canada, New Zealand, China and Guernsey and is believed to be being used in Malaysia today for some big public capital projects.
Gradually, over time, the banking system (by an increase in required reserves) would be increasingly restricted in its own creation of money unless such creation demonstrably spreads productive capacity and assists sustainable development.
Estimated value or influence
The proposal in its full form focuses all new money creation (as loans) onto environmental capital and the development and spreading of various forms of productive capital.
Moreover, the proposal is capable of being implemented in lesser developed economies.
Therefore the overall value of the proposal can be described as environment-friendly, financially huge, global-wide, effective and inclusive.
Other matters and key points for discussion
Since the loans are repaid and cancelled and result in an expenditure of half, or less, of the usual cost, there is probably only one substantial question to be addressed — Why are they not used?
The answer is that an out-dated understanding of reality and an outdated financial system are wrecking the world and they need to be changed.
63. Norman Kurland, Dawn Brohawn & Michael Greaney (2004) op. cit.
64. Robert Ashford & Rodney Shakespeare (1999) op. cit.
65. Tarek el-Diwany (2003) The Problem with Interest.
66. Tarek el-Diwany (2003) op. cit.
67. Tarek el-Diwany (2003) op. cit.
68. Tarek el-Diwany (2003) op. cit.
69. Robert Ashford & Rodney Shakespeare (1999) op. cit.
70. Rodney Shakespeare (2007) op. cit.
Next page: Incomes for All