Day 240: A Bank for the People

We have an interesting point being taught in economy books - which is that an increase in investment spending has an expansionary effect on the economy - because money is invested in certain products and therefore, people are being paid or jobs being created, which means an increase in income, which means more consumption spending and so a multiplier effect sets in - because, in turn, consumption spending increases income, which increases consumption spending, where of course the increase each time becomes smaller and smaller and eventually 'dies out'. However, on the flip side - what is not spoken about in the text books, is how, at the same time as a multiplier effect is in progress - there is also a growing debt - because interest rates cause a debt to increase over time as well. And this debt, which is eventually a multiple of the initial loan, must be repaid, and so money again disappears from the economy, causing the economy to shrink.

So, within Living Income Guaranteed, we suggest banking will still be relevant from the perspective of big capital investments such as housing or cars. In some countries, we see a rising trend of loans being taken out, not for such big capital expenditure, but for day-to-day living costs, such as food and clothing. Such points will stop within Living Income Guaranteed, because one will be guaranteed to have an income that is sufficient to provide oneself with these basic necessities.

So - when it comes to loans, banks will herein make money through asking for a once-off fee rather than an interest rate - where this fee must cover labor costs and a profit markup - where the fee is reasonable from the perspective of what is required for banking to be profitable without creating a monopoly on money. And of course loans must only be undertaken if the capacity exists for the debt to be repaid.

The creation of money through fractional reserve banking would have to be revised and a way of money-creation be devised so that it stands in relation to supporting the rate at which the economy is growing - which must take into account population growth as well as available resources.

So - herein, banking becomes an actual life-support system where big investments can be paid over time and where it will increase and support the value of the citizen in terms of their life. And thus, the banking system becomes a means to truly supports economic growth as well as the growth in value of a citizen's life.

Related articles

• Money for Nothing: Switzerland Eyes a Basic Income Guarantee
• Switzerland's Proposal to Pay People
• Day 251: Living Income Guaranteed and Market Mechanics
• Day 226: Living Income Guaranteed will Prevent Destruction of Homes

Day 233: Can LIG provide us the punch to beat the recession?

Whenever the point of policies in relation recessions opens up in economy textbooks, we look at expansionary and monetary policies to help stimulate the economy. Within this government spending, taxation and interest rates play a major role. Here, we are pulling strings from a giant tapestry, hoping that a pull here and there will have an effect way down, on the other side of the tapestry, somewhere down the line… (if we allow enough time to pass by of course).

Yet, we can stimulate the economy a lot more effectively by boosting the aggregate demand in the economy, through the implementation of a Living Income Guaranteed
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By granting everyone who does not have access to a stable income with a grant that allows them to live a decent life, we generate a greater level of disposable income. Those who were previously surviving and saving – now transfer more money towards spending and consumption.

As disposable income goes up, demand goes up, spending goes up and the wheels of the economy are greased up: economic activity goes up and economic growth is being promoted! As people want more things, more people need to be employed and the unemployment rate goes down. People get their needs taken care of, suppliers and producers are able to sell their things and jobs are being created.
As the economic capital grows, the social capital improves as well. As people’s living standards rise, people become more effective and efficient in their activities.

Implementing a Basic Income Grant System, is a win-win situation.

Check out the following blogs for more information:

Living Income and Nationalized Resources

Living Income Can Save Capitalism

Living Income and Minimum Wage

Living Income Guaranteed and the Nationalization of Banks

Living Income Guaranteed and Pensions