RESCUE is a system that any bank can quickly implement for its existing and future loans. The loans will not cause inflation and will produce goods and services at the lowest possible financial cost.
RESCUE is a circular word where each letter can start another word from the remaining letters. These words are
- RESCUE (the bank will rescue money from Plutocrats).
- Ere (Some Government and community-controlled banks operated this way before (ere — Gallic) modern banking),
- Secure (Users money is secure),
- Cures (Cures inflation),
- User (is focussed on the bank’s users),
- Sure (the users can be sure the bank will not exploit them)
The bank’s users are depositors, borrowers, and staff.
The RESCUE approach ensures that the money created and transferred within the bank cannot inflate in value because there is no way to increase or decrease the money tokens circulating within the bank without external transactions. RESCUE circulates money within a group of producers, consumers and depositors.
As the money circulates, it “comes to rest” when it is in a deposit account and whenever it buys an asset that can be sold. Money is “consumed” when assets depreciate or lose their value, and we can increase the amount of money by banks making loans.
Inflation happens when there is more money than the system needs. By guaranteeing that money circulating internally within the bank cannot increase, money circulation cannot increase the amount circulating. Today, loans that create new money are made to circulate ownership. If loans were only made to build assets, there would be no more inflation of money.
If the bank does not increase the amount of money circulating, it must be the least required for its members’ activities. This means that the bank is efficient and productive in transferring money. If efficient, it will give its users a high value for the least amount of money and attract customers. As all users have a say in the bank’s operation, they can agree on the value distribution of circulating money across custodians of assets, consumers, and investors.
Read the business case for turning a community-owned bank into a RESCUE bank.
A RESCUE Bank
A RESCUE Bank pays the interest on each loan it makes and keeps all the repayments within the bank for further investment by the depositors and borrowers. The bank users collectively decide when to take money into and out of the bank.
Banks transfer money between customers, store money for customers, and give loans to customers. When a loan is created, the bank, under the supervision of the Reserve Bank, creates new money purchased with existing money. Creating money incurs costs, which the borrower pays in a non-RESCUE Bank through capitalised interest. A RESCUE Bank covers these costs from repayments.
In a non-RESCUE Bank loan, repayments destroy the money. In a RESCUE Bank, repayments are made available to the community of users who work together to decide how to distribute or reinvest repayments with further RESCUE loans.
Why RESCUE Banks are Efficient
The Reserve Bank of Australia defines the characteristics of money as:
- Medium of Exchange: Money is a widely accepted means of payment, facilitating the exchange of goods and services.
- Unit of Account: Money provides a standard measure for pricing goods and services, allowing for consistent valuation and accounting.
- Store of Value: Money maintains its value over time, enabling individuals to save and defer spending with confidence in its future purchasing power.
Nowhere does it say that money is a generator of more money or that money today is worth more than money tomorrow, yet that is how the Reserve Banks allow banks to operate. Banks instead can operate as RESCUE Banks, increase the money circulating through loans, and keep the money created circulating among the bank members. If too many tokens are circulating, then RESCUE can slow the circulation or remove them. If there are too few tokens, then RESCUE can create more or export them. The Reserve Bank can control the money supply by asking RESCUE banks to slow or remove money from circulation, but the system is expected to self-regulate.
In a RESCUE Bank, money is democratic, meaning everyone gets to acquire it on the same basis. It doesn’t mean that everyone has an equal amount. This levels the playing field in finance, and communities share profits according to their contributions.
Further posts will outline how consumers of services and products can reduce the cost of goods and services by purchasing ownership of the assets producing them. In a modern economy, RESCUE will halve the cost of most goods and services by reducing the money and increasing the circulation rate.
Examples are housing, solar panels, a community battery, a city water supply, a course within a University, student accommodation, a local medical practice, a light rail line, and a local supermarket. The businesses will keep operating as they do today and share ownership with their buyers, investors and employees, who will acquire money through a RESCUE bank.
Why Traditional Banking is Inefficient
Debt capitalises interest and includes it in the original loan. Capitalised interest is a capital gain, meaning there was a transfer of value without any value transferred, guaranteeing inflation in the absence of productivity improvements. That means money bought quickly costs less than money purchased slowly. Debt guarantees inflation and that society will have skewed wealth distribution. Those with wealth will increase their wealth because money purchased quickly costs less than money purchased slowly.
Today, banks increase the money supply through capitalisation of interest with debt. This means there is never enough money in the system and we have to keep adding to the money supply. The system is designed this way, but it means the distribution of funds must become a Zipf distribution because wealthy people can pay off loans quickly, so the more money a person has, the cheaper it is to buy.
It is not interest that causes usury. Instead, it is the borrower’s payment of interest on new money and the other costs of other capital gains such as profit. It is not the profit that causes the problem. The buyer does not share equally in the benefits of the exchange, and wealthy people get most of the earnings from exchanges for goods and services because they have more money.
An Example
With a regular bank loan, a community member will pay $8,718 a year to repay a 20-year 6% loan. This will pay off their loan, and the bank will have $5,718 to cover their costs. Of this, half will be a capital gain, and the other half will cover their costs.
With a RESCUE loan, the member will pay a minimum of $3,000 annually, and there would be no reinvestment.
If the member paid $8,718, the community would have $5,718 to invest, and the member would pay off their loan.
In both cases, the bank would have the 6% or $3,000 to cover their costs.
For the bank to get the same profit with a RESCUE loan, the interest rate needs to be increased to 11.44%.
The borrower would now pay $5,718, and the community would have $7,199 to invest.
The Reserve Bank could now slow down or speed up the money in circulation by varying the interest rate on RESCUE loans and target home loans or any other loan type to make adjustments.
The Difference
Today, the financial system favours investments that buy existing assets. RESCUE favours investments that increase productivity. Regular loans favour the already wealthy, and money accumulates with a few who wait for others to create new value and purchase it. We call these people Oligarchs, and they are taking control of many countries.
RESCUE gives the advantage to those who produce new and cheaper products through investment. It favours those who cooperate and work together for the common good and is driven from the bottom up. We call this a democracy. RESCUE Banks and regular banks who convert can allow the people to take control of their country with democratic money, where everyone pays the same for each new dollar.
