A “Small but Beautiful” addition to the plan

Susan Witt, director of BurkShares community currency system presented on theFinance Lab Webinar today and I got to ask her to clarify how it eliminated the excess growth of debt. Then I thought of how the macro-economic solution Keynes first proposed could be usefully built into the design of local currencies to make them more popular and test the larger solution too.

Thanks for presenting on the Finance Lab today, and refreshing my understanding of how the BurkShares currency solves the debt growth problem. I actually attended a daylong seminar with Schumacher in the early 80’s but I seem to recall his director of the project, which I guess would have been you, was not there that day.

I remember trying to talk with him about one of the other strategies for keeping money and debt from growing unsustainably.  At that time I don’t think I even knew that Keynes and Boulding had seen the same option for allowing investment markets to stabilize at their natural healthy limits to growth.

Have you ever looked into what Keynes introduced as his “widow’s cruse” idea? He’d have had more luck calling it the “vigorous youth’s cruse” as it’s about how economies can climax their growth at their peak of vitality like growing organisms do.

If community currencies eliminate lending except for consumer credit, using printed currency for business investment, I agree that would largely stop ever growing debt. It would also eliminate some of the institutions of investment. People would not have investment income from their savings, and universities wouldn’t have endowments and lots of other things. There’s another simple alternative, without eliminating those basic investment market functions.

What you’d need is a way to assure that the earnings from lending do not accumulate to multiply more lending. It lending doesn’t grow in proportion to itself (multiplying unearned income), it stays in balance with people’s earnings by being limited to what people save from their own earned incomes.

One way to accomplish that would be to have returns on investment (or interest on debt) issued in a perishable currency, for example. Then people couldn’t lend them out again, but need to spend them before they expired, or other ways. Then a community currency would be more able to grow using market forces, but also limited from growing uncontrollably. You just need any way you like to cut the feedback of unearned income growing in proportion to itself.

For the national economy you could do it with the tax code. A savings tax could be adjusted to keep people from increasing their savings (and other people’s debt) faster than the nation’s prosperity and wellbeing. To avoid the tax people would be effectively compelled to spend enough of their unearned income to convert it back into someone’s earning rather than accumulate in excess growing debts. You might have an exception and allow unearned income to be saved if invested in valid community betterment purposes, say educations or productive habitat restoration or other lasting values with some return.

To me that last piece is the key. It would be a great source of financial capital for low profitability sustainable development. With that whole approach what controls both the money supply and the purposes of investment are well studied community indicators, while capping the inequities of growing debt and ownership.

Does that help you see what I’m trying to point to? It’s a quite interesting alternate strategy for making the financial system sustainable, changing the form of the system by removing only its most unsustainable part.

Thanks for your work,


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