In his Schumacher Briefing The Ecology of Money Richard Douthwaite sets out six questions to ask of any money you come across: Who? Why? How? When? What? Where? He then adds a seventh...How well does this particular type of money work?...and an eighth...Is this money compatible with sustainability? He asks question seven from the viewpoint of the three theoretical functions of money as: (a) a means of exchange; (b) a store of value; and (c)a unit of account.
When appraising Central Banking's Debt-Usury money that we all use, Douthwaite completely misses the mark. The real problem is the distortion of democratic economic choice by the dispatronage inherent in the commercial banks' money creation and destruction procedures. These result in 'one pound one vote' in local, national and global markets. Those with no money...like the poor and future generations...have no vote for products and services. Commercial banking dispatronage also fails to discriminate fairly and ethically between real people and the many other limited and unlimited liability institutions flaunting themselves as 'legal persons' to gain financial advantage over real individuals of flesh and blood.
There is another problem Douthwaite seems to be blissfully ignorant about and that is the double-Dutch book-keeping introduced into the operating rules of all central banks. These banks were set up for the specific purpose of solving the centuries old problem of financing war. Their money creation points two ways...and only one of them targets the commercial banking system.
On the second criterion...money as a store of value...Douthwaite does slightly better and gets it half right as bank interest creates inflation as Margrit Kennedy has demonstrated. Here's Douthwaite: 'if a central bank ever ensures that the store of value function is maintained perfectly too little money gets into circulation to provide easy trading conditions. This causes profits to decline, investment to fall and the rate of unemployment to rise.' John Maynard Keynes wrote a weighty tome...somewhat arrogantly called a General Theory which it isn't about this. His concept of effective demand could have been stated in a couple of sentences...but of course you don't become a peer of the realm for that.
On the third criterion Douthwaite is pretty sound when he writes about 'a more fundamental and serious problem with the modern [central bank debt usury] money as a unit of account.' As this money has no fixed guaranteed relationship to anything real...this was finally removed when the Major Powers took themselves off the gold standard...it can and does lead to 'a gross misuse of resources'. By way of example Douthwaite homes in on one particular tool in the business economist's bag of tricks: cost-benefit analysis. Here is Douthwaite.
In Finland in 1999 two alternative ways of meeting an increased demand for electricity were being compared. The first was to build another nuclear power plant. The second was to employ people to turn waste wood left in the forest after timber extraction into wood chips to be burnt in combined heat and power plants.
The costs and benefits of these alternative solutions naturally occur at different times in the future. For example, the nuclear plant would rerquire very heavy spending in the ten years of construction. For 30 years after that however the operating costs would be very low and the benefits in terms of power produced high. But after closure the benefits would stop while the costs of dismantling would continue for over a hundred years and the costs of safe waste storage for centuries. The wood waste alternative would involve less capital investment and give a more rapid start to the flow of benefits but because of the wages of the workers involved it would have much higher annual operating costs for as long as power was produced.
Analysts attempt to compare such projects by calculating for each cost and benefit the sum of money which, if invested today, would grow to be equivalent to the estimated amount of the cost or benefit in the year in which it occurs. These sums are known as the 'present net value' of the benefits or costs. The analyst adds up all the present values of the costs of a project and deduct them from the total of the present values of all the benefits. The project that has the greatest surplus of benefits over costs is the one they recommend for adoption.'
Douthwaite then cites the important 1973 article in Science 181 pps 630-4 by the mathematician Colin Clark The Economics of Over-exploitation where he demonstrates that this neat economical tool shows it is economically preferrable to kill every blue whale left in the ocean as fast as possible rather than to wait for the population of the species to recover to the point at which it could sustain an annual catch.
Douthwaite also mentions the horro scenario for the Nuclear Lies Industry that it is not that hard to demonstrate that dismantling a nuclear power plant and disposing of its waste consumes more energy than it produces over its full lifetime. Cost Benefit analysis is completely incapable of illuminating such possibilities.
