Democratic money costs the same regardless of the buyer. Today, electronic cash is undemocratic, and different people and groups pay different amounts to buy it because all banks introduce money into the economy with debt. Banks control and decide who has access to money, how much they pay, and for what.
Debt leases money while buying it removes many constraints on its use. Importantly debt compounds interest as interest is part of the debt. Renting does not compound as interest is not capitalised. Compounding means that money generates money, resulting in a capital gain for “no effort” on the lender's part.
The attraction of capital gains is that the lender gets someone else to do the work, and some of the rewards go to the lender. This leads to the desire to accumulate as much money as one can.
Lending money produces an economy that rewards greed, legalised theft and destructive competition. A lending economy is economically inefficient as we need much more money to make the same goods and services.
Selling money produces an economy that rewards sharing, giving and competitive cooperation. A selling money economy is economically efficient as we need less money to make the same goods and services.
Lending leads to plutocracies. Selling leads to democracies.
Banks do not have to introduce new money with debt. Instead, they can sell money under the same conditions as they buy money from the government. It lowers capital costs for buyers and offers competition within the banks. Today, all banks lend most of their money, and they lend most for short terms to those who have the most to spare. Banks buy money, loan it to most of the population, and sell it to the wealthy for much less than others. The rich purchase banks and find other ways to sell goods and services for a profit, resulting in another capital gain.
Selling Money
Banks today can sell money because they do it with wealthy clients. To move away from debt, governments can negotiate with one or more banks to sell rather than lend money for an acceptable reason.
Affordable housing is one such reason for most countries, and it is easy to do and can be achieved in two stages. Today, banks not only lend money, they also capitalise interest by debiting interest on loan accounts and do not give the resulting funds to the borrowers. This practice is against consumer credit codes, but the banks have been permitted to do it by writing contracts that allow it. Banks can stop the practice overnight and compensate themselves with higher interest rates. This will keep profits the same or higher while removing the increase in capital gains. This accounting change will typically remove the 30% capital gain now enjoyed by the banks.
The next step of buying money and using it to purchase housing where occupiers become custodians of houses while the community owns the houses will reduce the capital gains by a further 30% on the lower cost. It reduces the amount of money needed to buy a home. Occupiers pay rent, and some of the rent buys shares in the house, making housing as affordable as it was in the 1960s.
The existing system remains and will evolve when some banks introduce greater competition into banking and finance. Banks with this competitive approach are expected to have higher profits but fewer capital gains.
- Banks lend existing money without interest capitalisation.
- Banks sell money to build or buy community-owned assets where the bank becomes a community-owned asset.
Community-Owned Assets
Community-owned assets have a designated custodian, and every entity that pays to use the asset buys a share of the asset they use with part of their payment to use the asset.
A government can incrementally introduce the idea of democratic money and community assets by dealing with banks that use democratic money within the existing rules and conventions of the financial system.
- Enforcing the existing interest and fee capitalisation rules on credit card and home loan debts.
- Encouraging community-owned housing to purchase new money from banks.
- Encouraging governments to convert public infrastructure, like toll roads and land, into community-owned assets.
- Encourage community banks to become community-owned assets.
If banks do not voluntarily move to community-owned banks, then governments can legislate to make it happen.
