EK4T Annotated Resources

Money and Banking Resources

The money and banking systems are now conflated – the banking system not only manages the system of payments but also creates the electronic money we use.

 

Introduction

(article) Brief summary of the design features of the money and banking system and its flaws

(audio) The invention of money – This American Life
A radio journey into money told through three stories: the unmovable stone money of a pre-industrial society, the confidence trick that restored faith in the currency in Brazil, the vast money creation by the Federal Reserve during the financial crisis. The program provides a sense for the constructed and ephemeral quality of money.

Three introductory videos by the Positive Money Institute

(video) Why is there so much debt?
Explains how money is created by the banks with the issuance of debt and the reason for the ever increasing level of public and private debt.

(video) House prices. Why are they so high?
Shows how the money creation associate with bank lending inflates real estate bubbles and destabilizes the economy.

(video) Power of Banks vs. Democracy
Shows the corrosive effect on democracy of the private banks’ power to create money.

 

Banking 101

For a more in-depth introduction to money and banking here is a six-part series of videos by the Positive Money Institute called Banking 101 (less than an hour in total)

(video) Misconceptions Around Banking – Banking 101 part 1
Banks do not keep our money safe for us, nor are they financial intermediaries taking in deposits and lending those deposits out.

(video) What’s wrong with the money multiplier? – Banking 101 part 2
The most common model for explaining money creation – the money multiplier, is an incorrect model of reality. Banks to not have to wait for deposits in order to make loans. Loans come first – loan creates deposits not the other way around.

(video) How is money really made by banks – Banking 101 part 3
Show the accounting privilege banks can use to create money

(video) How much money can banks create? – Banking 101 part 4
Note: There are no reserve requirements in the UK. Technically, we have reserve requirements in the US but they are effectively not constraining the level of lending of the banks. As Alan Holmes, Senior Vice President of the Federal Reserve Bank of New York in 1969 “In the real world, banks extend credit, creating deposits in the process , and look for the reserves later.” The Federal Reserve accommodates the needs for reserve of the private banking sector since they moved away from controlling the quantity of money in circulation a couple of decades ago and focused instead on the federal fund rate.

(video) Do banks create money or just credit? – Banking 101 part 5
The electronic money created by banks in the process of extending credit (making loans) is effectively turned into money by the public sector deposit insurance (FDIC in the US insures bank deposits up to $250,000 per person).

(video) How money gets destroyed – Banking 101 part 6
The money creation process is reversed when loans are repaid. Loan repayments shrink the money supply.

 

Money creation

(web page) How banks create money – Positive Money Institute

(article) Money Creation in the Modern Economy – Bank of England 2014 Q1 quarterly bulletin (intermediate)
Explains how most of the money we use is created by the private banking sector when they make loans. Explains the effect of quantitative easying in the UK.

(web page) Where does money come from? – Positive Money Institute

 

History

(book) The Web of Debt by Ellen Brown
Provides the historical perspective for our current money and banking system. Reads like a crime novel but is actually non-fiction!

(video) The Secret of Oz
Full length documentary tracing the history of our current money and banking system.

 

Effect of money system on the economy

(video) How the economic machine works by Ray Dalio (intro)
Explains how the credit cycle (driven by money creation by the banking sector) affects the economic business cycle.

(video) Significance of monetary reform by Michael Rowbotham
Explains the pervasive impact of our debt-based money system on our economy and our lives

 

Needed reforms and solutions

(video) Could these three simple changes to banking fix the economy?

(book) Modernizing Money by Ben Dyson and Andrew Jackson (intermediate)
Very clear book explaining monetary theory, how the current money and banking system works and how it need to be transformed to stabilize the economy and to recapture the value of money creation for the benefit of the society at large.

(website) H.R. 2990 National Emergency Employment Defense (NEED) Act  (intermediate)
This is a bill introduced by Congressman Dennis Kucinich in 2011 to implement the type of monetary reform described in Modernizing Money (see above). It would create a Monetary Authority to determine the amount of new debt-free money to be created, it would nationalize the Federal Reserve and put it under the US Treasury and eliminate fractional reserve banking therefore taking away the power of the private banking sector to create money. Banks would be turned into financial intermediaries. Here is the text of the bill.

(video) Private Debt and Fiat Money: Lessons from the crisis and from some old economic texts by Adair Turner (intermediate)
Groundbreaking keynote speech looking at the faulty economic thinking that got us into the financial crisis and looking at economic insights of thinkers of the past suggesting a radical reform of the money and banking system.

(video) The Chicago Plan Revisited by Michael Kumhoff (intermediate)
Michael Kumhoff explores ways to implement in our modern times the radical redesign of the money and banking system proposed after the Great Depression by thinkers associated the Chicago School of Economics

Economics resources

Introduction

(video) Connecting the Dots about the Economy – by Robert Reich (intro)
What’s wrong with the economy and how we got here (in 3 minutes)

(video) Rich people do not create jobs – TED talk by Nick Hanauer (intro)
Shows that the “job creators” are actually the middle class providing aggregate demand to the economy

Inequality

(video) Wealth inequality in America (intro)
Shows the extent to which wealth inequality has grown in America. One mechanism for the continued increase in wealth inequality is the debt-based money system since our money supply is “on loan” from those who have wealth already or the private banking sector that can create it. The interest we pay collectively on the entire money supply is a tax on the productive economy that transfer wealth in the hand of the few.

(article) Economic growth and inequality (intro)
The claim that we need economic growth in order to address inequality is simply false. Economic growth has actually increased wealth inequality since the 80s.

History

(book) Economics Explained: Everything you Need to Know About How the Economy Works and Where it’s Going by Robert L. Heilbroner, Lester Thurow, (Touchstone Press, May 1998)
Tracing the history of the evolution from feudalism to capitalism. Great introductory book to modern economics.

Problem

(article) Our Current Economic System and the Next (intermediate)
What are the key design features of the current economic system (capitalism) that make it so destructive to society and the natural environment?

Environmental and Ecological Economics

Environmental economics is an economic theory that, unlike neo-classical economics, recognizes the value of unpriced natural capital (natural resources and ecosystem services), assigns a price to them and apply the methods of standard neo-classical economics to obtain socially optimal allocation and resources and income using market mechanisms. In other words, environmental economics attempts at internalizing the externalities. Ecological economics recognizes that the entire neo-classical economic framework is flawed (even its more benign ecological economics subdiscipline) since it does not recognize the economic system as completely embedded into the ecosystem and constrained by the limits the biosphere imposes on human activity.

(video) Externalities by David Suzuki (intro)
An externality is the cost that affects a party who did not choose to incur that cost. Pollution is an example of an externality – the person creating the pollution usually does not pay for it and the cost is born by other (society). Externality is what the market does not “see” (and therefore does not value).

(article) Natural Capital at Risk: The top 100 Externalities of Business (intermediate)
Groundbreaking reports by the TEEB (The Economics of Ecosystems and Biodiversity) of the UN showing how our global economy is using unpriced natural capital at a rate (in 2009) of $7.3T. In other words, we are treating nature as a business in liquidation.

(video) Time is Running Out: Ecology or Economics? by David Suzuki
A powerful talk by David Suzuki about the need to view economic activity as embedded in the ecosystem and ourselves as part and parcel of it.

(book) Ecological Economics by Herman Daly and Joshua Farley
Economics textbook for the 21st century. Starts from the very simple observation that no biosphere = no economy.

Solutions

(article) Our Current Economic System and the Next (intermediate)
By understanding the key design features of the current economic system (capitalism) that make it so destructive to society and the natural environment we can build an economic system that is compatible with a just and sustainable society

(article) How to make the debt ceiling obsolete (intermediate)
The government debt is used as an argument for cutting needed government programs or raising taxes. Reclaiming money creation as an essential government function would obviate the need for government borrowing or the use of taxes for the purpose of financing the budget deficit.

(article) What would a compassionate society look like? (intro)
How would we set up an economic system that meets the basic needs of all its members?

(video) Shift Change (intro)
Trailer of the documentary Shift Change on worker-owned cooperatives

(video) The Story of Change
How do we bring about social change?

Finance resources

Problem

(article) Out of Control: The Destructive Power of the Financial Markets
A good and accessibly written article explaining the problem with the global financial markets and the risk they pose to the global economy.

(article) Investing and the Disappearance of the Sacred by Marco Vangelisti
Points to the role our own investments play in financing the destruction of the very natural ecosystems on which our survival depends.

(book) Flash Boys – A Wall Street Revolt
Tells the story of Wall Street insiders that realize high frequency trading is a predatory activity and that stock markets had been organized to benefit financial intermediaries rather than investors. They go about fixing the problem by building their own fair electronic stock exchange (IEX).

(video) The Crisis of Credit Visualized
The financial crisis of 2007 and 2008 and the economic crisis we are still dealing with 7 years later, had to do with the freezing of credit in the shadow banking sector. This video explains in clear and concise way the functioning of the shadow banking sector (the chain of financial intermediaries that turned millions of mortgages into investment securities) and the origin of the financial crisis.

(audio) The Giant Pool of Money – This American Life
A radio journey explaining how the demand for return by international pools of investment capital fueled the sub-prime mortgage crisis in the US (see also prior video).

(audio) Return to the Giant Pool of Money – This American Life
Revisiting the financial crisis a year later

Solutions

Slow Money

Slow Money is a movement sparked by the book Inquiries into the Nature of Slow Money by Woody Tasch. It originates in the realization that our food system and our financial system are broken and that we can fix both from the ground up by investing our money in real people, real places, real enterprises close to home starting with food and farming.

(website) Slow Money Principles
The first being “We must bring money down to Earth”

(book) Inquiries into the Nature of Slow Money: Investing as if Food, Farm and Fertility Mattered by Woody Tasch

(web page) Seven Ways to invest Slow Money in Food Businesses by Arno Hesse

(book) Financing our Foodshed: Growing Local Food with Slow Money by Carol Peppe Hewitt
Documenting the many Slow Money loans made in North Carolina in support of the local foodshed and nourishing the local economy and community.

(article) A Few Thoughts on Slow Money Investing by Marco Vangelisti
Why isn’t there a local Slow Money fund where we can invest our money? Why is local investing in food and farming both challenging, rewarding and important?

(video) What if You Could not Scare Me?  by Carol Peppe Hewitt

Local Investing

(book) Locavesting: the Revolution in Local Investing and How to Profit from it by Amy Cortese
Looking at the many ways communities around the country have experimented with local investing.

(article) How to Invest Local by Amy Cortese (a quick summary of her book Locavesting).

(book) Local Dollars, Local Sense: How to Shift Your Money from Wall Street to Main Street and Achieve Real Prosperity by Michael Shuman

(article) Local Investing – A Powerful Tool for Effective Economic Development by Marco Vangelisti
What if our local governments used incentives for local community-based investing instead of massive tax break to large corporations to create local jobs anchored to place?

Investing Vehicles

There are very few professionally managed funds open to everyone (not just rich people – called “accredited investors”) that are investing in projects with positive social and environmental outcomes. Here is a short list.

(web page) RSF Social Investment Fund
Managed by Rudolf Steiner Foundation. Invest in three sectors – agriculture and food, education and the arts, environmental stewardship. Minimum investment $1,000.

(web page) Northern California Community Loan Fund
NCCLF builds low-income housing in California. Minimum Investment $1,000.

(web page) Calvert Foundation Community Investment Notes
Calvert Foundation gathers funds from investors (minimum $20) and support the work of non-profits and micro-finance institutions around the world supporting small enterprises. They are testing place specific investment notes in the US – the first two are in the Twin Cities and Denver where residents of those two cities can invest in a fund that improves their city.

(web page) Additional funds aligned with the Slow Money principles

Direct Investing
Direct investing means investing directly in a business or enterprise without a professional intermediary like a portfolio manager. It requires more time and the development of the necessary skills to assess the investment risk and the viability of the business or enterprise.

Platforms Open to All

Prosper – Peer-to-peer (P2P) lending platform

Lending Club – P2P lending platform

KivaZip – Zero-interest P2P lending platform

Community Sourced Capital – Sero-interest P2P lending platform

Fundrise – Commercial real estate investment platform

Platforms Open to Accredited Investors

AgFunder – Platform focusing on agricultural investments

Circle Up – Investment platform focusing on consumer brands

Mission Markets – The market for impact investing

2 Comments

  1. A few thoughts on Slow Money investing - […] is a partial list of currently available investment platforms and a short list of non-extractive mutual […]
  2. A few thoughts on Slow Money investing - […] Here is a partial list of currently available investment platforms and a short list of non-extractive mutual funds. […]

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