Credit and Labour

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James Clayton
Credit and Labour

John Stanford recently pointed out that the Bank of Canada has now jumped on the quantitative easing bandwagon with both feet, pledging to buy at least $5 billion of Government of Canada bonds every week until the economy is well into its eventual post-pandemic recovery, likely to continue for at least a year.

He suggests that we should push to cement and strengthen the practice of quantitative easing so governments at all levels can better mobilize the power of money creation to pay for the services, jobs and investments we’ll need to recover from this catastrophe.

As he says, the central bank is simply doing what private banks do every day: creating new money by advancing credit.

And the Bank of Canada says that its immediate goal is to help Canadians bridge this difficult period by making credit affordable and available.

Many people will certainly need some financial assistance before we’re out of this crisis, and a lot of people will definitely be deeper in debt when this economic downturn has subsided. Most people will also be ready and willing to re-enter the market and repay their debts when they can.

But there is a systemic shortage of state-sanctioned money because it is created as interest-bearing debt. Every dollar is “loaned” into existence with the flick of a pen or the click of a keyboard and must be repaid with interest. Total aggregate debt, including principal and interest, is always more than the entire amount of money in existence at any one time. And compound interest causes debt to grow exponentially.

We’ve been lead to believe that all of this debt can be paid off if we just cut expenses and work harder, but the monetary system is designed to keep us in a collective state of perpetual debt (no matter how hard we work) so that we will keep paying billions of dollars in interest each year to obtain some of our collective credit. Debt servitude is the name of the game.

State-sanctioned money is an instrument of control. We don’t control our labour if we don’t control the allocation of our credit.

The central bank and other financial institutions can create money for government (by allocating some of our collective credit) when politicians want to spend more than is collected in taxes—as long as taxpayers will keep working to pay the interest. Taxpayers in Canada are collectively spending more than $60 billion in interest each year to “service” the total amount of government debt.

The banks, trust companies and credit unions also create money for businesses and consumers, if we are deemed worthy enough to receive some of our collective credit. They don’t mind if we go deeper into debt—as long as we’ll continue doing the work to pay the interest.

New money is often “loaned” into circulation even when an equivalent value of goods and services isn’t brought to the market, which can lead to monetary inflation and price inflation. This debases the currency and decreases the domestic purchasing power of the dollar over time, which steadily erodes of the value of our savings (if we actually manage to save a few bucks). State-sanctioned money is not a reliable store of value.

The banks can also decide to withhold some of our collective credit—even for productive purposes—when we are ready, willing and able to do the work to repay the loan.

After all, most people are probably willing to work and there are plenty of worthwhile activities that can be done, but there is a general shortage of state-sanctioned currency because it is created as interest-bearing debt, which restrains legitimate economic activity and leads to a shortage of paid employment and involuntary unemployment.

We’re essentially competing for money that is always in short supply. If we’re desperate enough for a paycheque then we might be willing to take any paid employment that we can get, even if the work is unrewarding, unenjoyable, unsafe, unhealthy, unproductive, wasteful or downright destructive. Work that is done in exchange for money is basically controlled by those who control the money.

We are doing the work to create things of value, to produce goods and provide services, but the banks don’t really produce anything. And we are naively using state-sanctioned currency to exchange value—our goods and services; but state-sanctioned currency is not a benign medium of exchange or a reliable measure of value (and the value of a dollar isn’t even defined). The monetary system is not designed to ensure reciprocal trade or the mutually beneficial exchange of goods and services.

Money nowadays is generated by making digital accounting entries. It doesn’t really cost anything for the financial institutions to essentially create money out of thin air (by allocating some of our collective credit); but the banks collect billions of dollars in interest, which can then be spent to obtain some of the goods that we produce and the services that we provide. The banks are essentially taking a cut of everything that we do—without providing an equivalent value of goods and services in return.

We’re doing the work—but the banks probably don’t really care what we’re doing, as long as we’re paying interest for allowing them to control the allocation of our collective credit.

As taxpayers we also pay for minting the coins and printing the bank notes that we use as tangible tokens of credit, so the banks don’t even have to pay for that.

And they don’t even have to worry if they really mess up: we’ll get stuck doing the work to bail them out.

The monetary system is designed to steadily extract value and expropriate part of our wealth. We’ve been duped and defrauded for too long.

But we could use a credit clearing system to mediate transactions and facilitate the exchange of value. We could keep an ongoing record of transactions, transfers and fluctuating account balances (i.e. credits and debits). An account would be credited when an individual or business provides goods and services; and an account would be debited when an individual or business obtains goods, services, labour, etc. Accounts would be allowed to have negative balances within established debit limits without being charged interest. Accounts with positive balances would not be paid interest.

We could provide a sufficient amount of short-term interest-free credit to each other, with certain conditions. This would allow us to obtain products and services if we are ready, willing and able to provide an equivalent value of goods and services within a specified period of time, which could be extended during a crisis (and we could also offer some accumulated credits from accounts with positive balances to those who can’t work).

By taking control of our credit and our labour we could avoid the improper allocation of credit, decrease our overall debt burden, provide opportunities for people to participate in the production of goods and provision of services, and perhaps reduce our workload.

Maybe we could use this present crisis as an opportunity to take control of our collective credit and allocate a sufficient amount of interest-free credit to each other to facilitate the reciprocal exchange of our goods and services for our mutual benefit.


Glad you mentioned the BoC's alarming QE. I did as well but got only crickets in response. It's more important than ever for Canuckleheads to get what's going on and how royally they are being screwed. Please continue to post on this even if it may seem there's nobody home.

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