Paul Brinkkemper: Have you ever tried to explain to someone how money is created as a loan by banks? Then you most likely came across misunderstanding, disbelief and apathy. If the movement for monetary reform is to gain influence among the general public, we have to educate many people. To be effective we must find persuasive ways around the common psychological defensive reactions. To do this, we have created a board game called Money Maker to make it fun and easy to understand the banking system. In Money Maker every player becomes a bank that can create money, similar to how a modern fractional reserve bank works. While playing, players subconsciously create a credit boom and watch it fall apart in a big bust. In the end, only the richest player wins, but all players walk away with a fundamental understanding of our broken banking system, and if they pay attention, some pointers on how the system can possibly be improved.

What are the common reactions to hearing how banking works?

If you happen to have a conversation with friends or family on the workings of the monetary system, you may recognise one of three common reactions:

1. Many people simply do not care. “All that banking is very complicated, and abstract. I have better things to do with my time. Why bother? I don’t understand how it works, and I am not able to change it anyway.” An apathetic public is unlikely to catalyse any improvements in the money system.
2. Misunderstanding is also a very common reaction when talking about how the banking system works, especially when talking with trained professionals. When speaking about the money system with a banker or an economist, there is almost a Babylonian confusion where people use the same words but attach different meanings to them. Especially when using the word money. M0; M1; M2; M3; TMS, are a few of the many different definitions of money. It is very difficult for people to work together if they do not have a shared vocabulary of the tools at hand.
3. Disbelief is very common among people who have a certain degree of education or training on the subject. It can be very difficult to let go of a worldview that you have held onto for a very long time. “Why would this person talking about money creation now here tell me the truth? Surely, if it was that important, I would have learned about it in high school. Or otherwise I would have read it in the newspaper or heard it on television” is a typical reaction. We even met one journalist who was not allowed to write about money creation in his newspaper because “money creation is the topic of conspiracy theories.” When you cannot talk about something, it becomes nearly impossible to solve any issue related to it.

Why should we focus on changing the minds of people who don’t agree with us?

These reactions are what one might consider part of the cognitive dissonance that people employ to keep their worldview intact. Psychologically, we need to keep our worldview intact to function in the world: doubting the existence of gravity every five minutes can be troublesome. But if our attachment to our current worldview is too rigid, it can prevent us from learning new things and evolving.

From the perspective of the monetary reformers, this cognitive dissonance lies as a great psychological defensive barrier between our group and the public at large. If we are to influence the greater public, we will need to find a way around this psychological defensive barrier. This is exactly why we have created the board game Money Maker.

How do you play Money Maker?

You play an investment banker in a city during the renaissance. All players start out with some money and an infinite amount of credit that they can create. There is a market for production and consumption goods, commonly referred to as ‘work’ and ‘food’. Every turn the players can bid on investments, the highest bidder wins the investment. Investments cost a certain number and type of goods to build and produce a certain good every turn. Players can pay for goods and investments with money or credit. At the end of a players turn, a roll of the dice determines the influence of credit on the economy and whether there is inflation or a credit repayment event is nearing. During a credit repayment event, all players must repay their outstanding credit with gold coins. Players that repay their credit successfully, increase in credit rating and can employ a higher leverage. Insolvent players that cannot repay their credit must borrow from solvable players. In the end, the richest player wins.

How does Money Maker explain complex economic concepts?

Money Maker is a microcosm of the Fractional Reserve Banking System, so very early on players figure out that they can spend more credit than they have money to buy the best investments. This leads to great increases in the price of investments and goods: the psychology of credit causes a credit-fueled boom. Without realising it, players learn about the credit-fueled boom and bust cycle.

Eventually, the credit must be repaid. Players who have spent too much credit need a bail out from their more careful competitors. These competitors can exploit the need of these indebted players to demand interest or the properties of indebted players in exchange. In this way, players learn about the importance of solvability and liquidity.

Without focusing on the exact terminology, Money Maker highlights the importance of the concepts behind solvability and liquidity.

When players repay their credit successfully, their credit rating improves. A higher credit rating means that they can spread out their credit over more places. This reduces the chance that they need to repay all of their credit at once. A higher credit rating means that players can create more credit and that the credit boom enlarges. This helps players learn about the workings of leverage.

In the game box, there is also an easier version of the game where players play without being able to create credit. To play Money Maker without credit is similar to a full reserve / sovereign money banking system. Players then see that there is no more boom and bust cycle, and experience the stability that comes with this. There is also a possibility of a debt jubilee in the game, which allows the players to experiment with how a mass cancellation of all debts would affect the economy. This shows players how the money system can be reformed to work differently.

And what do people think of it?

Playing Money Maker is a great way to introduce people to the workings of the banking system because it is an engaging way of learning. Rather than learning from a book, players are experiencing it in a game. Since the parallels to the real world are obvious, you can hear players say things like “You are a total Greece, so deep in debt” or “you are a real Goldman Sachs, profiting of others misfortune.”

Most importantly, playing Money Maker is a great way to get around the common psychological reactions against hearing how the banking system works. Any misunderstanding amongst players is quickly resolved by consulting the rulebook. For the duration of the game there is a suspension of disbelief. This suspension then carries over into the real world at the end of the game. Since players have seen the fractional reserve banking work in miniature, they can easily imagine it working similarly in the real world. Instead of exhibiting apathy, players are engaged in the game and trying to win. They experience that their actions can have a positive impact on the outcome. And most importantly: they experience that the money system is a system that exists by consent, and that if they play by different rules, the money system can work much simpler and be more stable for all players.

To learn more about money maker, you can find out more at www.moneymaker.games, or get in touch via hello@moneymaker.games.

For IMMR members, we have special deals to resell Money Maker to your fans in your country, as an tool for fundraising, education and community building. You can find out more about this online at partner.moneymaker.games

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We would argue that there are other winners in what Hickel calls “the microfinance game”. Corporate interests of all stripes have a vested interest in seeing millions of people drawn more deeply into the debt-based globalized money economy.

Reposted from Local Futures Helena Norberg-Hodge talks about the false promise of Micro-finance.

Ever since Bill Clinton and the World Bank enthusiastically embraced the microfinance concept in the 1990s, we at Local Futures have been skeptical of its benefits, seeing it as part of a whole package of “market solutions” to our social and environmental crises that, in the long run, make things much worse. We have pointed out that these loans often target rural populations who were not previously in debt: they represent the long arm of capitalism reaching into remote rural areas, encouraging a shift away from dependence on the land and the local community, towards competition in a resource-depleting global economy.

It has not been easy to oppose micro-credit: many well-intentioned grassroots activists have bought into the idea that giving ‘Third World’ women a loan would eradicate poverty and reduce population. This thinking was promoted with missionary zeal, and spread rapidly across the world. In trying to counter it, we have often felt like heretics. (One of the most difficult moments was when I was asked to debate Muhammad Yunus, the founder of the Grameen Bank, at the height of his popularity, on BBC radio.)

For this reason we’re very happy to see this article by Jason Hickel, a professor of anthropology at the London School of Economics, in the UK Guardian: The microfinance delusion: who really wins? As Hickel says, “microfinance usually makes poverty worse”, because the vast majority of microfinance loans are used to fund the purchase of consumer goods that the borrowers simply can’t afford: “they end up taking out new loans to repay the old ones, wrapping themselves in layers of debt.” Even when used to finance a small business, the most likely outcome is that the new businesses fail, which leads to “vicious cycles of over-indebtedness that drive borrowers even further into poverty.” The only winners are the lenders, many of whom charge exorbitant interest rates. Hickel concludes that “microfinance has become a socially acceptable mechanism for extracting wealth and resources from poor people.”

We would argue that there are other winners in what Hickel calls “the microfinance game”. Corporate interests of all stripes have a vested interest in seeing millions of people drawn more deeply into the debt-based globalized money economy. Interestingly, at the bottom of the webpage where Hickel’s article appears there are links to articles sponsored by the credit card giant Visa, all of them urging more “financial inclusion” in the global South – in other words, bringing more people into the economic system that corporate interests like Visa dominate. “Helping the world’s one billion unbanked women” turns out to be about how “more than 200 million women lack access to a mobile phone, meaning they’re excluded from digital banking opportunities.” Another article argues that one of the greatest challenges facing policymakers involves “providing some 2.5 billion people with access to formal financial services.”

This is propaganda, pure and simple: it is part of a drumbeat coming from think-tanks and corporate-friendly pundits that have been very effective in convincing people – including well-meaning philanthropists and activists – that the solution to global poverty requires pulling ever more people into the global economic system. That system is failing the majority even in the “wealthy” countries, while spurring rampant consumerism and unsustainable resource use worldwide.

The solutions to our many crises – including poverty – will not come from a global marketplace rigged by de-regulatory trade treaties to favor the biggest multinational corporations. They depend on preventing further deregulation of global corporations, while shifting towards more localized economies in which people can have real control over their own lives.

The post Small Loans, Big Problems: The False Promise of Microfinance appeared first on P2P Foundation.

Statement #OccupyBanking #ReturnWithFreedom Enric Duran from Radi.ms on Vimeo.

We want to finance the team that is already working on the launch of the #OccupyBanking campaign with the intention of placing at the center of public debate the total lack of democracy of the European Central Bank (ECB) and large private banks who control the monetary system, and especially the creation of money. A perverse system based on debt with these institutions – who have never been voted in democratically – hijacking our sovereignty. The #OccupyBanking campaign also wants to be the spearhead for creating the conditions that allow the #ReturnWithFreedom of the activist Enric Duran.

The current crisis / fraud perpetrated by the financial and banking system in recent years has uncovered one of the problems that have long been highlighted by many activist groups: from the anti-globalization demonstrations in Seattle up until today, the effects of globalized capitalism have been exposed around the world: based on growth through pillage (pollution and destruction) and overexploitation of resources, and the use of debt as a way to subjugate people to pseudo-feudalist economic powers, a model – in view of the evidence of recent years – that has been shown to be extremely harmful to the needs and welfare of humanity and to all living beings.

In this context, in 2008 Enric Duran made public an act of conscious condemnation of this system that involved the expropriation of 492,000 euros from thirty nine financial institutions in order to:

We’re going to start #OcuppyBanking, a global campaign to expose both the European Central Bank and the banking system and at the same time strengthen the effectiveness of the original action that Enric made, and thus to generate a great movement of support that makes possible his #ReturnWithFreedom. We want to plan his way to come out of hiding,meanwhile denouncing internationally the framework of the European banking system, which is condemning us to the loss of popular sovereignty and the accumulation of wealth by a privileged minority who are plundering the resources of peoples through the privatization of public services, handing theirmanagement to private entities linked to the political and financial powers.

Behind these perverse mechanisms underly a system of creating money out of nothing based on loans contracted; simply trusting that the person signing the contract will be able to give back the money in some way, and if unable to do so, is going to be sanctioned economically or politically. And what is worse, banks –private entities that defend their own interests – are the only ones with the privilege of creating money, whichmeans they have the political control of who will receive funding and how, in the same way that the ECB – even though no one has given them a popular mandate – are ordering policies affecting all the peoples of Europe.

Like the publication ‘Crisis’, published in 2008, several initiatives have exposed these issues in recent years and some have achieved some successes, such as getting the debate about the creation of money to the British Parliament this autumn. Now with #OccupyBanking we are working hard to link these initiatives and to make itpossible to occupy the space in consciousness and public debate they deserve throughout Europe.

So this funding campaign aims to cover the costs of travel to different countriesand the accommodation of Enric Duran‘s team of seven people. We need to ensure at least the economic sustainability of the working group until September 2015, when we rethink the strategy, i.e. seven months with an average monthly expenditure of 2,400 euros, representing a total of 16,800 euros for the maintenance of all equipment.

You can support us financially for the success of this plan with the amount that you feel within your means (any input is welcome); and even if you can not contribute financially right now, we also invite you to cooperate with the dissemination of materials and / or this funding campaign, also you can be part of local support groups that are being put into operation.

“It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning“.

Henry Ford (founder of the Ford Motor Company and the father of the modern assembly lines used in mass production).

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