National Endowment Fund
According to the WFE (1), at the end of 2007, the total value of all shares listed on all global stock exchanges was 64.47 Trillion US dollars. At the end of 2008, that same global share value had dropped to just 33.73 Trillion. In one year, 30.74 Trillion of paper wealth vanished into thin air. 30.7 Trillion is more than five times Canada's total net worth in 2008 (6.07 Trillion ). In just one year, the value of 5 Canadas just disappeared.
We're in deep trouble here folks. Speculative financial gaming has created a worldwide bubble machine and in 2008 about half of our retirement savings burst into nothing. The global financial system is out of control and governments around the world appear to be in cahoots with the crooks who scammed us.
So if all this paper wealth is just smoke and mirrors, what then is real wealth? If you look at Canada's National Balance Sheet Accounts, you will see that Canada's non-financial assets (non-paper wealth) amounted to 6.1 Trillion dollars in 2008. This figure includes all of our land, buildings, machinery & equipment, inventories and durable consumer goods (goods of significant value like cars, boats, major appliances, etc.). So if you were looking to sell our country to someone and wanted to establish a fair asking price, 6.1 Trillion is it. According to Statistics Canada (2), after paying off all of our financial liabilities with all of our financial assets, 6.1 Trillion is all Canada is worth.
But wait a minute, the two most valuable assets we have aren't even listed on our National Balance Sheet. Surely our human resources and natural resources are our greatest treasures. All of the assets that are listed are simply a byproduct of bringing human and natural resources together. So why aren't these resources included in our accounting system? Herein lies the solution to our problems of usury and debt.
Suppose we simply added another line item to our National Balance Sheet labeled human resources (leaving natural resources out, for now). How could we determine a reasonable value for this line item?
Let's try the minimum wage. For easy math, let's say the average worker works 40 hours per week, for 50 weeks of the year, or about 2,000 hours per year. If that worker earns a minimum wage of $10/hr and works from the age of 25 to the age of 65, in those 40 years he would gross (before taxes) only $800,000 for a lifetime of work. In this age of billionaires, $800,000 for a lifetime of work seems ridiculously low, but let's try using it anyway.
If each working age person is worth $800,000 and there are roughly 19 million Canadians between the ages of 25 and 65, if we set our line item for human resources to the lifetime value of 19 million earning the minimum wage, it would equal $15.2 Trillion dollars. Wow, that's a lot of money. So let's us only one-third of that amount. Surely $5 Trillion would be more than reasonable to use as an estimate of the value our people.
Now if we add this value to the asset side of our National Balance Sheet, we also need a corresponding liability worth $5 Trillion to keep our double-entry accounting ledger balanced. So lets create a new line item on the liability side of our balance sheet and call it a National Endowment Fund. We could then use the fund to offer all Canadians an interest-free, tax-free, non-repayable, once-in-a-lifetime, line of credit to help them get started in life. The endowment fund would simply monetize the currently intangible value of every Canadian and would be a birthright of the people. The fund would recognize that all human beings have value and contribute to society in many ways other than just through paid employment (ie. parenting, volunteering, caring for the elderly, etc.). The fund would also recognize that the strength and value of a nation is inextricably tied to the value of its human resources.
This one-time only endowment would be created for every Canadian once they reach a qualifying age of majority (the age of 25, perhaps). To protect it from inflation, the amount of the credit would be indexed to the market price of a bundle of necessities needed to get started in life. It would be sufficient to purchase a home, a new car, an education, etc. The endowment fund would be a government-created, line of credit without interest charged or paid. It would not be an income fund, it would be a once-only endowment fund. It would not be enough to live on without working, but it would be enough to help people get started in life without being exploited by the usury of interest.
Paying back the line of credit would be optional, but once it was used up there wouldn't be any more. Paying it back would be a way to save money for emergencies, retirement, etc. When a person dies their corresponding line of credit would be extinguished. No one else's money or credit would be affected and there would be no third party losses whatsoever. The balance between assets (people) and liabilities (credit) would always be maintained on the National Balance Sheet.
The table here http://www.monetaryreform.com/MR/firstStep.htm gives an estimate of how much it would cost to launch a National Endowment Fund that offered a maximum line of credit of $250,000 per person ($500,000 per couple).
The credit amounts would be reduced, in age increments of 15 years, by $50,000 per increment. So if you were 25 to 39 years old, you would get the maximum line of credit of $250,000. If you were 40 to 54 years of age, your line of credit would be reduced by $50,000 to only $200,000. If you were 55 to 69 years of age, your line of credit would be reduced again by $50,000 to only $150,000 and so on.
The main reason for the reductions is to keep the total cost reasonable, but it can also be argued that, since older people have already acquired some assets on their own, they do not need as much credit as younger people who are just starting out.
In order to qualify to receive an endowment, however, you would need to be a Canadian citizen who has lived and worked in Canada for at least 15 years. The estimate includes a cost reduction of $518 Billion based on recent immigration statistics from Statistics Canada.
The total cost to launch the fund would be just under $4 Trillion, which is only about 26% of the lifetime value of 19 million workers earning the minimum wage. $4 Trillion would be a very reasonable estimate of the value of our human resources to use on our National Balance Sheet.
A line of credit of $250,000 would represent 31.25% of a minimum wage workers total lifetime earnings. 31.25% of an 8-hour day is just 2.5 hours ...so to justify giving minimum wage workers a 31.25% premium over and above their paid labour, we could reasonably expect them to contribute 2.5 hours per day of additional unpaid work to Canadian society. Most parents and homemakers already spend at least 2.5 hours a day on unpaid chores alone. Caring for friends and relatives, and volunteering is done in addition to that.
So at minimum wage, a $250,000 endowment would be equivalent to just 2.5 hours of pay per day over 40 years. For people earning $25 per hour, the endowment's value would be equivalent to only 1 hour of pay per day over 40 years. That's not really an excessive or unreasonable gift is it? And considering that it enables the population to break free from the shackles of finance and the misery of usury, isn't it a very small social cost indeed?
Where would all this new money come from? From the same place the banks now get the money that they lend ...from thin air and a few keystrokes on a computer. The endowment fund, however, would be created by the government through its own bank the Bank of Canada. It would be public credit, not private credit.
Won't all this new money cause inflation? No, the endowments would not create much more credit than what the banks have already created, or would create in the future anyway for new mortgages, car loans, education loans, etc., so it would be no more inflationary than the system we already have. In fact, it would be less inflationary because interest costs would no longer be embedded in prices. The endowment fund would be designed to automatically pay off all existing mortgages and consumer debts first, so that only the remainder (if any) would be available for new purchases. Also to prevent inflation, the rights of all private lenders to create money & credit out of thin air would be abolished at the same time the endowment fund was set up. For the truth about inflation, see "The Menace of Inflation" at http://www.monetaryreform.com/MR/Articles/inflation.htm.
People will simply go on a spending spree and waste the money they are given. There would, of course, be some who would squander the opportunity to lift themselves out of the financial wreckage of life. To reject the whole plan, however, because of its inability to be 100% effective, would be like ignoring a cure for cancer because it helped only 80% of the afflicted. Yes having a more equal opportunity in life will force us to confront the irrationalities of excessive consumption more quickly. But such a day of reckoning is long overdue for all of us. At least the exploitation of the productive by the unproductive will have stopped and many more will be available to contribute truly productive work towards the needed solutions. And much of the personal financial stress that is tearing us apart will have been alleviated.
The suggestions here are simply a positive, practical, first step forward towards relieving the suffering that usury is causing today. Nothing will change unless a majority of people can clearly and immediately see positive, personal benefits in the solutions offered. Most people will recognize instantly that the quality of their life would improve if they could access a $250,000 interest-free, non-repayable personal line of credit once in their lifetime. Whether they know anything about banking or money creation or not, they should still support the idea at the polls, if they believe that the political party that proposes such a reform will actually carry it out once they are elected. A solid majority government elected with this mandate could implement these changes immediately.
We need solutions that are realistic and achievable today, in the here and now. The beauty and strength of these suggestions lies in the fact that they don't change most of the mechanisms of the existing economy at all. The credit creation process itself remains intact, just the interest disappears. Credit becomes a public utility, not a private extortion racket.
If you like these ideas, don't you dare just click away and do nothing! Democracy demands more from you than that. E-mail me with your ideas and suggestions about how to make this work. We may need to start a new political party, or political S.W.A.T. team if you like, whose sole mission would be to rescue the citizens of Canada who are being held hostage by the financial elite who now control our government and the monetary system of the entire planet.
Let the evolution begin!
1 source: World Federation of Exchanges, Annual Statistics, 2010, Equity Markets, Domestic Market Capitalization, http://www.world-exchanges.org/statistics
2 source: Statistics Canada, Cat#13-022-X, National Balance Sheet Accounts, Data Tables, Table 1, Fourth Quarter 2010, http://www.statcan.gc.ca/pub/13-022-x/2010004/tab-eng.htm
I am clearly not an economist but is this not the financial equivalent of a perpetual motion machine?
I am clearly not an economist but is this not the financial equivalent of a perpetual motion machine?
Brilliant. Thanks for your input.
donOld, and what you seem to be proposing is a funny-money scheme we all used to know as Social Credit...
donOld, and what you seem to be proposing is a funny-money scheme we all used to know as Social Credit...
The only "funny money" scheme here is the $30.7 Trillion that just vanished in 2008. The money I'm proposing would be backed by real tangible assets, the Canadian people. Social Credit ...wow! It's incredible how the prisoners rise to defend their captors.
Society is the collateral under your scheme, and everyone gets credit by virtue of living in that society. It seems like Social Credit is exactly what is being proposed here.
...it seems like Social Credit is exactly what is being proposed here.
Social Credit was an income program. Human Credit, if you like, is primarily a debt transfer program that simply moves existing debt from private banks to an interest-free public bank. I'm suspicious of the intent behind your comparison to the Social Credit movement. I fear that it may merely be an attempt to dis-credit my post by associating it with a failure from our past. I hope this is not the case.
We should give everyone a magic flying dragon as well.
When a loan is made under the current system, money is created and the money supply is increased by that amount. When the loan is repaid, that money is removed from the money supply. As loans are made and repaid there is an overall balance in the money supply, with it generally increasing during good economic times and contracting during bad. Your proposal is to give everyone a "a $250,000 interest-free, non-repayable personal line of credit once in their lifetime." This would add a huge amount to the money supply without a mechanism for removing it. Currently each Canadian dollar cycles through the system 30+ times a year. I think your system would lead to a huge amount of inflation and would defeat its own purpose by reducing the value of the currency for the rest of us.
Assuming we are going to live in a free market capitalist system, we have to make sure that it works and ameliorate its most deleterious effects on humanity and the environment. Confidence in the currency as a stable medium of exchange is a cornerstone of that system. As money tends to go uphill in this system, we have force it to go downhill through taxation based on the ability to pay. As we do that through infrastructure programs and reasonable income supports, the economy continues to grow. I would rather know I had social supports and a good community to live in than have an inflationary loan of $250,000.
As far as money lost in the stock market is concerned, that is a problem I am sure many rabble.ca readers wished they had...
"This would add a huge amount to the money supply without a mechanism for removing it." The line of credit (liability) is removed automatically upon the death of each citizen (as the asset expires).
"I think your system would lead to a huge amount of inflation ...for the rest of us." This is the typical programmed response of people who don't really understand the true causes of inflation. You are repeating illusions created by the economists who profit from the money-for-rent scheme that now robs us blind. Please re-read the paragraph in my original post about inflation and follow the "The Menace of Inflation" link ...and who the heck does "for the rest of us" refer to? Every Canadian citizen would qualify for the endowment fund.
"Assuming we are going to live in a free market capitalist system..." when? we haven't had free markets for over 100 years. You probably believe that "invisible hand" crap too. Ever notice how the most important stuff about capitalism, religion, etc. is always invisible ...we're just supposed to accept it all blindly on "faith".
"Confidence in the currency as a stable medium of exchange..." yeah, that's what we've got now for sure. Just ask the Chinese or Russians or Arabs, who are dumping their US$ and buying strategic resource companies as fast as they can to avoid the coming implosion of the US economy, how stable they think the US$ - the reserve currency of the world - really is.
"taxation based on the ability to pay..." wow! you MUST be one of them, signing the anthem of capitalism, right here on the web site of Canadian workers. I know you know the rich move most of their "ability to pay" out of the reach of our tax system ...don't you?
We should give everyone a magic flying dragon as well.
Brilliant. Thanks for your input.
Maybe this will help?
The Nature of Wealth & Debt
The architects of our financial system invented the double-entry accounting system to ensure the perpetual need for debt. Even money itself originates as debt and must be entered on both the asset and liability sides of a balance sheet. Making debt essential was the cage to ensnare humanity. Interest was the key to lock the cage door. Interest would ensure that the issuers of debt could perpetually collect a private tax on the total value of all of the assets on earth. In a nutshell, these are the secrets of our debt-based monetary system.
Charging interest on loans makes it easy to convince people that too much debt is a bad thing. It also teaches them to expect that the amount of debt they can access will be limited by their income level. If you are rich, you can borrow a lot to become even richer. If you are poor, you are stuck with whatever meagre income you can earn from your own labour. This unequal access to money lays the foundation for capitalism.
The poor have few choices and must remain dependent on those who have capital. The poor cannot afford to invest in the education needed for a high paying job and must remain dependent on those offering minimum wage positions. The poor cannot afford to buy their own home and must remain dependent on those who offer rental housing. The rich, on the other hand, can rely on these disadvantages of the poor and capitalize on them. The rich can use borrowed money to exploit the productivity of minimum wage workers and make huge profits for themselves. The rich can use borrowed money and the rental income from their tenants to acquire apartment buildings and housing properties for themselves. By denying the poor access to capital, the rich can control markets and acquire fabulous wealth for themselves.
But with our double-entry accounting system, to say that too much debt is a bad thing also implies that too much wealth is a bad thing. Under our accounting system wealth and debt are simply opposite sides of the same coin. Wealth cannot be created without debt, and debt cannot be eliminated without destroying wealth. It is curious then that those who demonize debt never suggest whose wealth should be obliterated. To strive to limit the amount of wealth that society can produce by cultivating an exaggerated fear of debt is pure skullduggery. It is as ridiculous as saying that, although we have the human and natural resources necessary to produce new wealth, we simply can't afford to be any richer.
It is not the amount of debt itself that is the problem, it is the cost of servicing our debt that gets us into trouble. Interest payments rob income from people with too little wealth and reward people whose wealth is already more than adequate. If interest was abolished, people with too little wealth could afford to borrow to develop their potential and the artificial need for a planned scarcity of money would disappear.
Throughout history we have been warned repeatedly by presidents, popes and bankers alike that a privately-owned, interest-bearing, debt-based monetary system would enslave humanity, control governments and make a mockery of democracy. Our forefathers fought and died to free us from the grip of usury that the Bank of England used to control the colonies. Yet despite their ultimate sacrifice, early in the 20th century, the governments of North America simply gave away their sovereignty and the most precious right and sacred responsibility of any government, the right to create and control the currency and credit of a nation. One simple act of treason quietly returned the most precious power on earth to the private banking system.
If governments exercised their right to create interest-free credit for the nation, society could rebuild and enhance its infrastructure immediately. Without the burden of interest, the cost of restoring our national asset base of roads & highways, airports & seaports, schools & hospitals and government buildings & equipment, would never have to be repaid any faster than the rate at which the assets actually depreciated. Our double-entry accounting system requires it to be that way. To keep our assets and liabilities equal, we do need to pay down our debt as our assets wear out, but it is totally unnecessary to reduce our liabilities any faster than our assets depreciate. As long as the value of an asset exists, a corresponding liability must also exist. So if a public hospital was built to last 100 years, without interest payments, taxpayers would only need to pay back 1/100th of the cost of building the hospital each year. With interest payments however, taxpayers must pay the cost of building 2 or 3 hospitals before the loan is complete.
I am not rich. I am just an average guy trying to look after my kids, and I work every day. I am quite interested in socialist theory, and many of them say that if a socialist workers state was started up tomorrow, we would still have what we had left over from today, and faced with the problem of how to change that to benefit the workers and society as a whole. Generally the idea is to nationalize the top 150-500 banks and corporations, as they are the ones doing the looting, exploiting, and killing. The economy would be put under democratic control, and industrial priorities would be reset. I expect a big housing program would get started, as we need decent housing for a lot of people. Some social programs we have now would be continued (and probably improved), and some might no more be needed (such as welfare as everyone would have a job or we would have a superior income security program or basic needs would be provided by society at no charge)
When you pay back a bank for a debt under the current system, you are actually retiring the currency. Whether the bank is nationalized or not. Writing off the debt still leaves the currency out there, chasing fewer and fewer goods.
You seem to be very angry that we are not accepting your idea hook line and sinker. We bring up some arguments against your idea, and you go ballistic. It is not the end of the world if other people on the left do not support your idea. Maybe you see yourself as being on the left, as you claim this is a workers site. Most ideologies claiming to be pro-worker say you cannot do much to fix the current system. SOme may even claim that money itself is the problem, and will wonder how giving people more of it is going to solve anything.
You seem to be one of those ideological people who think they have all the solutions to the worlds problems, and then use all kinds of names to defame the people who challenge your ideas. Sort of similar to say, The International Communist League or maybe even the Church of Scientology. Having been fairly insulting in my direction, may I ask that you consider that perhaps you are going to get nowhere by attacking me? I have heard worse from better.
Interest provides the inducement for people with money to lend to those that don't; the concept is essential for the functioning of any value-added economy. Do away with interest? You might as well try to do away with entropy! Yes, abusive lenders should be reined in, but by REGULATION rather than proscription. If we want a society where working people can even hope to succeed in having some personal control over our futures, we need a properly-regulated debt market - even anti-"usury" Muslims are increasingly finding scripture-santioned means of leveraging.
You seem to be very angry that we are not accepting your idea hook line and sinker. We bring up some arguments against your idea, and you go ballistic.
Ballistic? I'm not even angry ...just passionate about truth. I'd hoped for more constructive comments from this web site, so I am disappointed (which tends to stimulate my sarcasim glands). I'm trying to get people to go deeper in their economic thinking and to encourage them to challenge the most primary axioms and assumptions that economists use to shield the truth. Just "follow the money" and do your own indepedent analysis, trusting your own common sense to guide you through the mumbo jumbo of lies and distortions that the "experts" profess in order to confuse you. Ask yourself who wins and who loses by having me believe that? The answers are very revealling.
Having been fairly insulting in my direction, may I ask that you consider that perhaps you are going to get nowhere by attacking me?
Uncle John, I truly apologize if anything I said seemed like a personal insult or attack to you. It was certainly not intended to be.
Interest provides the inducement for people with money to lend to those that don't; the concept is essential for the functioning of any value-added economy. Do away with interest? You might as well try to do away with entropy!
Wow, who are you people? That's the kind of ideological rubbish that I would expect from the Fraser Institute, not from Rabblers. You're creeping me out of here. Have a nice life.
Alright, so you want real criticism, alright:
1) Sorry, but you can't just hand out four quadrillion dollars without it having ramifications.
- Many people would stop working
- Inflation would skyrocket
- The value of the Canadian dollar would plummet
It's the same reason that we don't just fire up the printing press and print 4 quadrillion dollars to solve all our financial problems.
A line of credit with no interest that doesn't have to be repaid is called a 'gift'. No one is paying it back.
2) You're setting up a two-tiered system - those who have worked in Canada for 15 years and those who haven't. Great plan if you were born in Canada, let's get all those dirty immigrants to do the work while we collect free money.
3) First you say, people get it when they are 25, then you say they have to have worked in Canada for 15 years. So, if I don't start work until I'm 18, then I get it when I'm 33? Which is it?
4) What do you think would happen to housing prices, if you hand everyone in the country $250,000? Do you think they would stay the same, go up, or go down?
What this plan essentiall does is give a lot of money to a certain percentage of Canadians (young and non-immigrant) at the expense of everyone else by drastically increasing inflation.
Nationalizing the banking industry I could get behind, but this plan just isn't well thought out. Sorry.
Actually the value of the fund would be $4 Trillion, not four quadrillion.
In 2008, the total amount of currency outside the banks was only about $50 Billion and GDP was only 1.6 Trillion BUT the total transaction base flowing through the Automated Clearing Settlement System (ACSS) was $51.2 Trillion. The ACSS is the clearing house for inter-bank transfers, and the figures that it reports do not include intra-bank transfers (between different branches of the same parent bank), OR cash transactions, OR stock market trading account settlements which clear separately. No one really knows for sure what the total annual transaction base is in Canada (including the underground economy) but it is probably at least $60 Trillion.
Flows (the re-circulation of the money stock), plus new debt issues, make this huge volume of trading possible when the money stock is only $50 Billion. So immediately you can see that adding $4 Trillion to the money stock is not that big a deal IF, at the same time, you eliminate some of the other Flow variables.
The Financial Party's plan to add $4 Trillion would automatically pay off all consumer credit ($436.6 billion), mortgage credit ($956.2 billion), and other loans ($112.6 billion) which all together total $1.5 Trillion. So really the plan would only create $2.5 Trillion in new credit. Plus, the remaining balance will not be spent all at once. Since the endowments are a once in a lifetime contribution, most people will stagger their spending and use them wisely (we will help educate them on that). Some of the money will be saved for retirement, some of the money will be used to purchase new houses, or cars, or an education ...all of which would have been financed using debt anyway. So we're not really increasing the money supply beyond its normal level by anywhere near $4 Trillion.
However, here's the key point. Because our plan eliminates much of the current re-circulating of the money stock, it is essential to increase the size of the monetary base to keep overall market demand near current levels. The re-circulation of interest income particularly has an enormous effect on the overall demand in our economy.
Possibly, temporarily, but the endowment fund is not an income fund. It's not enough to live on, especially after all existing debts have been automatically subtracted from it.
On the contrary. First the cost of interest would disappear from all input costs so retail prices would be less by the total amount of interest that previously accumulated as goods and services moved along supply chains. According to a study conducted in Germany by Margrit Kennedy, compounding embedded interest costs can account for over 40% of final prices.
Also, as mentioned above, by removing the re-circulation of interest income in the economy, the effective pool of money that is available to stimulate demand would drop significantly.
Also, I believe many people would react to this once-in-a-lifetime opportunity by actually saving some money for their retirement.
Of course, international financial speculators will not like what Canada is doing. Yes they will try to punish us by shorting the value of the Canadian dollar. Historically, counterfeiting has been the technique of choice (with American greenbacks, German marks, etc.). If you read the Commercial Credit page on the Financial Party web site http://www.financialparty.ca/ you will understand why that won't work with our system.
The greatest weakness that Canada has had up to now is that it has always been dependent on foreign capital for investment. No longer will that be the case. Public investment capital will replace the need for private investment capital completely. Plus, public investment capital will only be issued to enable new productivity, so it will be entirely non-inflationary itself. However, in today's complex, speculative financial trading jungle, there may be ways to short the value of the Canadian dollar on international markets, in which case, Canada would have to insist to export only in the currencies of it's trading partners. Using world commodity prices, in the currency of its closest competitors, Canada could acquire the foreign currencies that it needs to continue trading fairly on world markets. The need for such defensive techniques would be short-lived however, for the citizens of the world would quickly recognize that the Canadian experiment had brought such relief to the people of Canada, that they would demand similar changes from their own governments.
This is just a crude and malicious attack on the intent of the plan.The true intent is to prevent a flood of immigrants into Canada all at once and overwhelm the financial viability of the plan. Such a generous offer would catch the attention of the entire world. Immigration has to be planned and controlled in order to achieve the most beneficial results for Canadians.
The suggestion is that all Canadian-born residents qualify at the age of 25 years. All newcomers to Canada must wait for a qualifying period, regardless of their age. Both the qualifying age and the qualifying period are merely suggestions. If the Financial Party can solidify public support, then these details would be worked out collectively.
A more important question is, who should have the right to decide who deserves to own a home and who doesn't?