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A Credit Free Economy

Our economy is slowly dying. No one is proposing a solution because no one has the slightest idea of why it is happening. However an objective observation of the phenomenon can help us understand the phenomenon and provide us with an innovative solution. Of course we can't solve the problem with the tools that brought us there in the first place and we need a new ideology.

This text is not meant to go into every detail of our system. Its purpose is to start a discussion and create some interest in it.

The composition of this book has been for the author a long struggle of escape, and so must the reading of it be for most readers if the author's assault upon them is to be successful,— a struggle of escape from habitual modes of thought and expression. The ideas which are here expressed so laboriously are extremely simple and should be obvious. The difficulty lies, not in the new ideas, but in escaping from the old ones, which ramify, for those brought up as most of us have been, into every corner of our minds.


Since 1994 I have observed that long-term yields were steadily going down since 1981. I quickly concluded that should that trend continue we would reach what is known a Liquidity Trap, which is what we have now. Because of the Japanese crash of 1993 the Federal Reserve System has studied extensively the phenomenon and  has, to my opinion, not reached any satisfactory solution.

After two years I understood that that fall in long-term interest rates (Later coined the Greenspan Conundrum or Bernanke saving glut) was in fact due to a vast increase in the income/wealth gap between the rich and the poor.It is easy to understand:

The poor have a high marginal propensity to consume, (almost equal to 1) as any incremental dollar they earn they use to buy food, shelters, thing they need for their day to day life.

The rich: have a high marginal propensity to save (almost equal to 1) as any incremental dollar they earn they save as they already earn more than enough to cover their expensive lifestyle.

As the income gap increase relatively more and more money is devoted to investment and less and less money is devoted to consumption. That consumption contributing to the profits and hence to the return on investments it is easy to understand why these would go down.

Contrary to the current ideologies there is a high monetary value of consumption.


As that income gap becomes so wide that it becomes unsustainable the marginal return on investment comes down to a level that does not cover the interest rate risk for the weakest of the businesses and more and more businesses must close and go bankrupt. This of course increases the income gap.

At some point the whole economy will crumble. This would have already taken place if the governments didn't do whatever they could to keep alive the strongest corporations. But whatever is done it will not prevent that at sometime in the future even those will go down the drain.


That increase in income/wealth disparity is due to the very existence of credit. That is due to the fact that credit discriminate for the rich against the poor. 

The very poor doesn't get any credit, the poor get some with a very high interest rate while the rich get a massive amount at a very low interest rate. (the bank get it at almost 0% interest now.)

While the poor use that credit to consume and just postpone and increase their problem the rich use that credit to buy productive assets and increase their wealth.


We must get rid of credit and increase consumption that is the money in the poor's pocket.

To that purpose we must change the way money is emitted. Instead of making cheap credit to the banks which make credit to their wealthiest customers with the hope that it will trickle down we must distribute that money without interest rate (that is give it) equally to the people. This way we will restore demand and eliminate some of the unfairness of the system.

At the same time we must ensure that the supply stay sufficient and create some money uniquely dedicated to investment: companies that would belong to the emitting body but whose investments would be chosen freely by the people who would act as agent of the emitting body. Of course they would be remunerated as a function of the way they help reach the goals of society at large.


That does not mean that we would socialize the means of production but parallel to private enterprise there would be a system of socialized production which would compete with one another.

At the same time it is not our purpose to eliminate the use of credit based currencies but to establish another system parallel to the existing one.

This way our system would not destroy the prevalent economy but increase both consumption and investment.


In order to distribute our currency we will need to make it electronic. Our monetary institute will be a database to which could connect any type of means of payment: cellular phones, internet, dedicated means of payment...

In order to be effective such a system would need a sufficient number of participants. To that order we implement a system of registration of serial numbers of 5 euro notes: that right to participate constitutes what is called in games theory a cheap talk. We will start to implement our system when the number of participants will be deemed sufficient to render the system effective. 

That registration system is available at:

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Is the fulfilment of these ideas a visionary hope? Have they insufficient roots in the motives which govern the evolution of political society? Are the interests which they will thwart stronger and more obvious than those which they will serve?

I do not attempt an answer in this place. It would need a volume of a different character from this one to indicate even in outline the practical measures in which they might be gradually clothed. But if the ideas are correct — an hypothesis on which the author himself must necessarily base what he writes — it would be a mistake, I predict, to dispute their potency over a period of time.

At the present moment people are unusually expectant of a more fundamental diagnosis; more particularly ready to receive it; eager to try it out, if it should be even plausible. But apart from this contemporary mood, the ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else.

Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.

I am sure that the power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas. Not, indeed, immediately, but after a certain interval; for in the field of economic and political philosophy there are not many who are influenced by new theories after they are twenty-five or thirty years of age, so that the ideas which civil servants and politicians and even agitators apply to current events are not likely to be the newest. But, soon or late, it is ideas, not vested interests, which are dangerous for good or evil.