Every economy requires a mechanism to introduce new money. Presently, governments rely on banks for this, a process that involves lending money. When a borrower repays the loan, the banks cancel the loan and the money created by the loan. Banks receive a fee, known as interest, to cover their costs and generate a profit. However, this method has its drawbacks.
This is a costly way to create new money, particularly as banks increase their profits by charging borrowers twice the advertised interest on each loan. The first charge is called a return on capital, and the second is called interest. Both these charges are paid by the borrower. The bank collects the capital return, and the interest payment covers the loan’s cost.
Banks hide capital returns by not honouring their commitment to giving the money they create to the borrower to pay interest. They do this by debiting the loan account for interest and bank fees and giving themselves the money they create, but they “forget” their collection of money also pays the interest or fees.
While most loans do not necessitate the creation of new money, banks continue to profit significantly from the current system. This will only change if we demand it as a collective. Our unified voice has the power to bring about this essential change.
Today, loans are only given to those with money, and those who need them the most cannot get a loan. This perpetuates a system of inequality and injustice.
This project aims to reverse the current situation. It proposes that loans of existing money should be directed to those who already have money, while new money should be allocated to those who do not. This shift could create a more equitable and just lending system. The steps to achieve this are as follows:
- Stop banks from charging borrowers twice by using simple interest that prevents double interest payments.
- Ban the use of new money for loans to buy existing assets.
- Allow communities who build new assets to obtain new assets for the community and where the new assets remain in the community who built or purchased them.
This project will model the new financial system resulting from these changes. Its clients are the communities that will benefit. These communities will own the models created and obtain finance with community loans, empowering them in the financial system. The models are the “black boxes” of finance.
The $30,000 is the first such loan, and it will be repaid by the innovation fund selling its shares in the project to others — not by selling the models or taking any profit from the business.
