Event organized by Zeitgeist Movement
Verona, November 19th, 2011
Symposium "Sustainable Society"
Then, the first speaker is Enrico Caldari
marketing expert, new medias, independent researcher
Since 2005 he has concerned with monetary systems
and since 2010 he has also been popularizer, speaking to public
with a series of lectures entitled "What is money?"
and his facebook page "Kaldari Report".
He graduated in Statistics in Bologna
and in short, he does a lot of researches and interesting works.
We're not to be here redundant, get him come on the stage
and he will explain us what is the money. Thank you everyone.
- Thank you very much, Federico.
Thank you everyone.
I say it's a particular emotion for me
talking to all of you.
but I'll say the truth: I think i'll enjoy myself a little
and i will also entertain you a little.
As Federico has already said, i have made so many things in my life
As all of you, we say that, I had to engineer myself
to gain some money to live.
Indeed, i ask you a question.
How many of you need money to live?
Then I will change the question.
How many of you do not need money to live?
I don't see anyone!
All right. In 2005, you can see the date written on a small scale there
I have just started to deal myself not so much about money I was doing,
about amount of money I was doing, but on quality of money
i was using and that we all use.
about the nature of money.
So I started to explore the theme and some years later
some people have asked me to talk about that.
to talk about that around and therefore
I have put together a series of topics
that in the last 10-12 months i have brought around Italy
and even England
talking about a range of issues related to money.
For example I talk about origins of the monetary system.
on reason the nature of money is connected to current crisis
that is a economic, social, environmental crisis
and I would add spiritual crisis too.
and then how to change the money could be a solution
this is, in my opinion, the first solution.
Since we suppose that
all of us use money we know what it is
I ask you a first simple question.
Who creates the money?
Then, i'm sure the guy in front of me
has tried to print some money in his garage
but surely the tobacconist on the corner has caught him immediately.
Obviously the correct answer is: central banks.
Who creates the money?
[Central bank]
Wrong!
Now i think to understand that we need to deepen the theme for a moment.
Then, what you can see here is an graphical exemplification
of our amount of circulating money in our society
what we all use and it is divided into two parts.
look, there is a tiny green part and a larger dark green part . Ok?
What are these two parts?
Then, the tiny green part is money created by central banks
instead the dark green part is credit.
What is credit?
credit created, we say, provided by commercial banks, by private banks.
Then, I ask you a question.
If me and the guy here
who has had problems with tobacconist
we have a business relationship.
I have a credit on him, okay?
What has he got on me?
So if that 95% is credit, necessarily it corresponds to a debt.
ok? But there is a "but" ...
this debt will be repaid with interests.
Then, this very easy mechanism to understand
is the reason whole basis of circulating money has to grow
because to repay the debt which it is composed
as we should also repay all interests
Now i don't want to bore you, but the basic concept is that
today almost all the circulating money represents a debt
that we have to repay with interests.
This is, I quote a source of my assertion
is the last book by Richard Werner and Josh Ryan-Collins.
i also met him in London
and the book is titled "Where does money come from"
"Where does money come from", released in September of this year
and it is one of the most complete pubblications
released about this issue in the last years .
Now, you will return to home tonight
I take my fried here as example again
he will return to home this evening, he will meet his father in law and he will say him "Dear...
What is his name? There's no father in law, let's call him Mario.
"Dear Mario, you know that today I have attended a conference
in the centre of Verona, at the cinema, there was this guy is from Romagna.
He has said us that most of the money
is not created by central banks but by commercial banks
as credit, as a loan and they get it out of nothing.
What will Mario tell you?
This is not true, is not possible. I have got bills in my pocket
and there is written on central bank, it's not possible.
Then, but the guy from Romagna has quoted us other sources
for example he has quoted the chief editor of economics section
of "Financial Time" , in 2011 he declared:
"The essence of the contemporary monetary system is the creation of money, out of nothing
by private banks' often unruly lending."
The original adjective is "foolish" ...
Mario will say " Irritating journalists, one who says one thing
and one who says different things i don't trust, for heaven's sake
i wonder who that boy is".
So then I will quote another example.
This is an official document instead
is the quarterly bulletin of the Bank of England
Third in 2007, there is written on:
"The most important role to create circulating money is covered by the banking sector"
"When banks make loans, they create additional deposits for those who get into debt."
And Mario says
But the world is based on dollars, not on pounds
who cares if Bank of England said it.
But, be careful, because if even we talk about dollars
there's for example the document by Federal Reserve Bank of Chicago
entitled "Modern Money Mechanics" of '61
where is written:
"The actual process of money creation takes place primarily in the private banks. "
And Mario says: "But that's an old document, it's of '61"
Then, let's carry on.
However it was updated and republished in 1992
so anyway ...
"but we are in Europe, we use Euro. Who cares about dollars?"
Then to conclude:
"In the the 'Euro-system the currency is created primarily through the expansion of credit bank the commercial banks can create money themselves"
That is a document by Bundesbank entitled "Geld und Geldpolitik"
Does anyone know Geman? I don't, but i know what it means
"Currency and money policy"
Now, my friend's father in law here what will he say?
"You're communist"
Because then all arguments are finished
or alternatively "you are fascist"
"you are an anarcho-insurrectionist"
"you are a conspiracy theorist"
but what gives me more bother is..
when people say ... i have now overcome the others
but when people say "you are pessimist"
As those are just quotes from books and documents
let's look at some real things.
For example, this is the Wikipedia page
describes the economy of Greece.
You know that Greek is bottom of the class.
It has created many problems in the world economy
many fears and concerns, and i would say
in 2010 the greek government deficit was 26%
that is the greek government made 100 and spent 126
Obviously the rating agency's rating was the worst possible
bottom of the class: CCC-
But let's look at first of the class, United States.
I have a looked at the same information again of 2010
and i have verified it, the budget deficit in 2010.
Then i have discovered what no one had never told me
reading newspapers, listening television, books ...
in 2010 the U.S. deficit was 59%
The U.S. made 100 and spent 159
more than double of Greece.
Guess what the rating of U.S. government bonds was in 2010.
AAA+ is not a laugh but it is precisely the best possible rating.
Then, we are starting to understand somethings
to begin with it is not clear how rating is got by rating agencies
and this is a separate problem, however, what we begin to understand
is the problem of budget deficit of the states i would say
maybe it' s a "structural" fact, because a deficit like that is not usually done in one year
is not that what was unlucky one year, okay?
In fact, if we look at history a little
this is here the trend of the total debt of United States
not only as a government, because someone might say that
governament gets debts, but the companies don't get debts.
It is not true, this is the total aggregate debt of United States
from 1955 to 2010.
Do you see that red line? It's the structural trend of debt
It rises, okay? From 5000 billion dollars has exceeded
55.000 maybe 60.000 billion dollars
So clearly, a structural trend.
Now, returning to the origin of my talk, we have said that
whole circulating money represents a debt
It must continue to grow
because to repay this debt with interests
we need more and more money.
So the economy using money must continue to grow
We know that economy to grow , needs more and more money.
Why does the GDP grow? How does the GDP grow?
Surely exchanging more money faster
It's a way, but the quantity of money must increase.
So clearly this kind of sistem faces
a structural limit, that is, if we have seen
the continuing growth of total debt
the economy must grow continuously to repay the debt
There is a problem i would call Planet Earth
Planet Earth, where we live, is one and also limited.
So think about doing a constant infinite growth like that
on Planet Earth, perhaps it means to face with a structural limit.
Which is the other limit? If we continue
to increase the total debt with new deficit every year
clearly the expenditure to pay the interests, what will it do?
It will increase. Current expenditure, the salaries of politicians
maybe we compress it a little
but what is trend of investment spending? It falls.
So which is the other structural limit of this system?
Clearly it is if the debt continues to rise
and we have to pay the interests
sooner or later we'll pay only the interests.
Now very fast question: what do you think is
our economic system name?
Monetarism, market economy, free market.
Honestly I don't very interested your thought
what i think is in my opinion
the system name is "debt based economy"
Now i ask you, What is the end of this kind of system ?
I don't think about it just me, surely there is also someone else
but surely it won't make a good demise.
Now the question is: do we want to make his own demise?
to be buried under that mountain of debts
or we want to choose ourselves, maybe to bury it
and to invent ourselves something new.
Now to do that, let's look back on logo that i use on my blog
is pronunced Kaldàri
I left this little writing on it
on the 1 penny coin "We trust".
Whole our monetary economic system
and then our lives are based on trust about money.
Today that confidence is used a little surreptitiously
but it can also be used in a more useful and sustenable way.
That is Island of Guernsey between England and France
At the beginning of 1800 Island of Guernsey had a serious problem.
A total debt of 20.000 pounds.
on which it had state public revenues
we can say it was a small town, of 3000 annual pounds.
that had interests on debt of 2.400 pound a year
That means there was 600 pounds
to make investments and pay salaries.
They didn't pay salaries, they had a serious problem.
moreover they had decadent public structures
the sea eroded the coast
so they had a serious problem.
They had to invent a way to resolve it
without asking to borrow more money
becouse otherwise they wouldn't be able even to pay interests
and without charging other taxes to the popolation
that already was at the limit.
What did the people from Island Guernsey do in 1816?
A very simple thing, they took small pieces of paper
they wrote on "One Pound"
and "State of Island of Guernsey"
and they spent them.
Without borriowing or otherwise.
They took small pieces of paper and they wrote on them "One Pound"
and why did they take them? To pay the people
who were unemployed to get them to go and to cut the trees
reconstructing the structure of the market, the barriers to the port
and the economy restarted, okay?
This is defined The Guernsey Experiment
it is mentioned in several documents in the following years
also in 1900, so i quote for example 3
and it is remembered as the story of Island of
Guernsey that just created his own currency
no cost to the taxpayers and establishing a prosperous community
free community from debt.
indeed thriving community, prosperous means another thing.
Free community from debt.
Then, the people in Island of Guernsey understood
a very very simple thing
the currency that all of us know
as a way to exchange value and to save value.
Actually it has another function very much more important
that is the stimulus to the social development
that we measure as economic growth.
Now, because this thing here ...
Here there are economists, sure. How many economists are there?
One. Good, worse for you.
Then, Which is the speech?
That they did this operation
they printed tens of thousands of pounds
they threw them on the market, they bought the work
and there was no inflation on the island. But how?
If one prints currency, prints more currency out of nothing this creates inflation
Why was there no inflation, for a very simple reason
Because they invested to make useful things, productive activities
but what happens if you print money and use it for example
to mop up all the gold there is on the island?
So as everyone seek it, and no one find it and they are willing to pay more
and the next day they will sell it at a higher price.
What is this name?
Clearly they didn't use that money to do things like that
not for speculative activities.
Now i ask you a question, the quiz of the morning
just to wake up who already has signs of slowing
Can you imagine at 7 tonight. Then, question:
What is percentage of loans provided by banks for productive activities today?
Swich on it?
8%
Obviously this refers to the UK market
The european figure is a little difficult to assess
but it was mentioned by Ben Dyson at the conference in London
where i was time ago, where
he is Ben Dyson of Positive Money
who i met him, really a smart boy.
He also mentioned the governor of the Bank of England on 25th October 2010 he said:
"Of the many ways in which to organize the banking system what we have today is the worst"
I didn't say that. I'm pessimist/conspirator
Now, the question is
but how can we resolve this problem we have today
that is, the debt which is literally overflowing and flooding us?
Then, the first part of solution i descrive summarily
in my lectures sure is to do like the island of Guernsey
breaking the link between the money emission and debt
You'll say "but it's a very simple thing, maybe too simple"
So you say " let's make a monetary reform
we report the money emission to the state
or to a public body, we say.
Sorry, but at the beginning you have said that ...
Who creates the money? The Central Bank.
What is the Central Bank? A public body.
So i..
but in theory you should to think it's a public body
I have learned so.
Then i'm just saying :
we do as all of us believe
we report the money emission to the hand of a public body
in order to break the link with debt.
And you'll say ...
you say all these things but someone else has thought about it, right?
In fact in '80 years when the 500 Lire note was circulating yet
you could see a substantial difference compared to 1000 Lire notes
on 500 notes was written "Italian Republic State ticket legal tender"
while on 1000 Lire notes was written "Bank of Italy"
Where is the difference?
Then, the 500 Lire notes with on written "Italian Republic"
were printed by state and were expended, they did not represent any debt.
while if you read "bank" ...
What do banks do?
Question to guy here below:
what does the tabacconist on the corner do, what does he sell?
What does tabacconist sell? What does a grocer sell?
No, that one is a pusher.
What does the tabacconist sell? The cigarettes.
Then, what i ask you is: What does the bank sell?
The credit, that is debt. Then if you read "bank"
it means that someone has sold a debt to someone else.
So this thing was done
it's not invented by me, i will tell you more.
In England the guy of Postive Money, Ben Dyson
collected some documents, he wrote a good book
and he managed to convince two british parliamentarians
Labour Michael Meacherand and Conservative Steve Baker
respectively to the left and right, because they are the left and right
both to support the currency reform proposed by Positive Money.
What does it propose as a first step?
Exactly what we have said
to bring again the money emission to the hand of the state, to public body
not to Berlusconi or Bersani, clearly
to a public body which is able to value the impact and to do that
So this proposal is in the hands of two parliamentarians
Last Wednesday Ben and Josh Dyson
the writer of the book I have just mentioned
they also met other parlamentarians behind close doors
at the British Parliament, to propose it.
So this is not something invented by me, I come from Romagna.
Then obviously there are other points for a proposal of monetary reform
i propose at the lectures such as point for reflection
today there is no time, i have already breached the 2 minutes and 30 seconds
and then tomorrow if there is time at the meeting that will continue tomorrow
but now to conclude i quote a saying i really like
"think global act local".
We have talked about this issue of debt
of monetary system at the global level
But what can we do now?
Then, i and my friend Lore Prod
he is an artist and graphic designer from Romagna
we do great drinking
we have created a manifest. This manifest tries to do
what i think it is necessary to do now.
that is to focus the attention on issue and solution
on a possible solution.
What is the problem today?
All currency is debt today, it is emitted by private banks
is encumbered by interests and can only grow.
What, money or debt? They're the same thing.
What is right asking? Correct is asking
to bring again the money emission that we all use to the public hand.
The money is a tool not the purpose.
Then you can see archetype combination
dead and life, disorder-order, gray-color
In short we have worked a little
if someone here does communication sciences
He can write an article.
I'll also tell you, finally what is meaning of that hummingbird up there at the top corner.
I tell you a little story about hummingbird
Then, there is a bug large forest fire
all animals are fleeing included the lion
is running away from the forest and crosses a hummingbird
that is flying in opposite direction with a drop of water in its beak.
Lion looks at it and says:
"Hummingbird, where are you going with that drop of water?"
hummingbird looks at it again seriously and says:
"I don't know you, but i do my part"
Thank you and i have finished with this.
applause
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