Pat Conaty
Co-operatives UK
ISTC Conference, Split 10-12 July 2012

• 1235 – illegal for Christians to lend at interest
• 1545 – Henry VIII sets interest ceiling of 10%
• 1651 – Cromwell lowers ceiling to 6%
• 1776 – Adam Smith calls for 5% ceiling
• 1854 – Usury ceiling abolished
• 1927 – Moneylenders Act ceiling of 48%
• 1974 – Consumer Credit Act abolishes ceiling
• 2012 – Usury pervasive and systematic

Legal lenders (2012) - Loan costs (APR)
1. Credit cards: 13% - 50%
2. Pawnbrokers (secured loans):70 - 90%
2. Moneylenders: 350 – 500%
3. Payday lenders: 350 – 5000%
4. Bank overdraft (unauthorised): 70 – 800,000%

Office of Fair Trading and Consumer Focus research (UK)
1. Pension mis-selling scandal: £13.5 billion loss to households
2. Oligopoly and lack of competition: £8 billion
3. Payments overcharging small businesses and households: £3 billion to £5 billion yearly (Cruickshank review)
4. Excess charges on bank overdrafts: £2.6 billion
5. Precipice bonds product: loss to investors of £2 billion
6. Latest scams: Interest rate swaps for small businesses and fixing the Libor rate: losses to be assessed

1. Seigniorage (100% money and QE)
2. Public banking (being revived)
3. Terminating building societies (today JAK banking)
4. Labour notes (today: timebanks and LETs)
5. Stamp scrip (demurrage currency)
6. Mutual credit (mutual guarantee societies)
7. Social dividend (corporate ownership widening)

Public issue of money interest & debt free – many precedents:
1. American colonial money – free issue of notes (inflationary)
2. British £1 and £2 notes (1798 to 1821) and World War 1:
Bradbury notes issued in 1914 and Guernsey (ongoing)
3. Lincoln’s Greenback dollars – Civil War and intended thereafter
4. New Zealand: 1% charge for infrastructure/housing from 1935
5. Bank of Canada: 1938 to 1974 (nominal charge) for housing, infrastructure and social programmes
6. Quantitative Easing: Japan, USA and UK

Long history (profits retained for citizens)
1. Early US colonies
2. Europe: Trustee savings banks, municipal savings banks and
Post office banks
3. Reconstruction Finance Corporation (USA), KfW (Germany)
ATB (Alberta, Canada), Bank of North Dakota
4. Innovators in small business and housing guarantees – support SMEs in Germany and Italy
5. Oriented to fee-based or low-interest lending
6. KfW: 2.65% loan for green energy measures (housing and
SMEs) – created 247,000 jobs upgraded 2.1 million homes

1. Terminating Building Societies: 1775 to 1980 (UK, Ireland,
New Zealand and South Africa)
- mutual savings in pubs for building houses locally
- over 1000 by 1870 replaced by interest-lending
2. Co-op Time stores (USA) and Labour (UK) exchanges: commodity banks with money based on hours: 1827 to
1840s
3. Starr-Bowkett societies: 1843 to 1890 mutually saving and lending and a draw to borrow (also in Australia until 1960s)
4. Mutual banking (interest-free theory) – Pierre-Joseph
Proudhon, William Greene and Silvio Gesell

Silvio Gesell: Co-operative Money Theory
Natural Economic Order (1918): Practical Mutual Banking
1. Demurrage currency: from ‘black money in Middle Ages’, 20% decline over 5-6 years; coins reclaimed and reminted
2. Free-money with ‘negative interest’ rate of 5.2%
3. 1929 to 1933: applied in Germany, Denmark, Austria and the
USA, stamp scrip.
4. Worgl, Austria: 1932-33 unemployment of 30% reduced completely, ‘free schillings’ with 1% monthly charge.

Irving Fisher – Stamp Scrip and 100% Money
1.
Yale economist and a developer of Quantity theory of money, RPI and NPV (net present value)
2.
Supporter of Gesell and stamp scrip based on JS Mill argument
(1844) about ‘freeing up access’ to working capital
3.
Argued the case to Franklin D Roosevelt in 1932: two cents stamp weekly per $1.00, bill put to Congress in 1933 for $1 trillion
4.
Stamp scrip banned in Germany, Austria, Denmark and USA from
1931-33 by Government and central banks
5.
Argued in 1936 that banks should lose the power to create money as debt – 100% money theory with no ‘fractional reserve’:
supported in 1939 by 235 economists ( from 157 universities)

Monetary Reform of Keynes - ‘cheap money’ for stability:
(i) Monetary reform: capping of government bonds (long, medium and short) 0.5% to 2.5% real, central bank targets
(ii)Domestic economy focus: fixed exchange rates, stop bank foreign lending with capital controls
(iii)‘Golden age of capitalism’: social wealth redistribution, low inflation and no banking crises or depression until 1970s
(iv)UK five-year gilt mean annualised return of 1.4% (1899-2003) and 7.0% (1977-2003) - Pensions Commission (2004)

1. Housing finance
2. Liquidity and mutual credit
3. Social dividend

• Co-operative finance funds developed from 1931 in Denmark and from Sweden in 1965 – JAK: 1.5% of Danish money supply in 1934, before Gesellian currency banned
• Innovative: a hybrid of a terminating building society and a credit union with a focus on secured loans for housing
• Members save at ‘no interest’ and get secured loans at a low management charge and risk fee
• Loan costs of 1.5% to 3.5% and no bad debt
• Local Enterprise Banks (LEBs) – fund housing, ecological projects, social enterprises and refinance high cost debts
• JAK Sweden: 35,000 members, 20 paid staff and 300 regional volunteers for local branches

1. Fund for Humanity: interest-free fund for Habitat for
Humanity self-build housing groups – 500,000 homes built and 2.5 million housed in 90 countries
2. CoopHab – Brazilian terminating building society for co-op housing. Each society has 1000 members; all secure interest free mortgage loans by year 10 (100 allocated yearly)
3. Wessex Home Improvement Loans (UK) – shared interest loans of 3-4% and interest-free equity loans for housing repairs –recycles interest-free capital from local government

1. Inspired by JAK Denmark model made illegal
2. Set up in 1934 to provide mutual credit with a social currency for small businesses in Zurich
3. Provides low-cost working capital to business members who mutually own WiR (‘the ring’)
4. Turnover now 2 billion Swiss Francs yearly and involving
75,000 business members of a Co-operative bank
5. Operates as a complementary, fee-based currency
6. Mortgages 1.5% and 2.5% on mutual credit

1. Chiemgauer – ‘negative interest’ (8% yearly), 2-year currency in Germany with notes and electronic debit card in partnership with GLS Bank and 3 other co-op banks
2. New mutual credit system, C3 in Uruguay similar to WiR
3. Community Development Banks in Brazil – 55 community banks provide interest-free loans in local currency.
4. Shared Interest (UK) – low-interest loans, Fairtrade co-ops
5. Mutual Guarantee Societies: low cost working capital in EU countries – potential to move to a WiR system

Social Dividend and Basic Income Guarantees
1. Long history: Thomas Spence, Tom Paine and Henry George as land value tax or Community Land Bank to capture economic rents
2. Social credit: CH Douglas - 100% money but distributed as a universal income to replace debt with interest-free money
3. Sismondi (1819), Schumacher (1973) and the Meidner Plan
(1980s in Sweden): corporations above a certain size must issue shares to workers and local citizens; replacement for corporation tax and captures asset income for local people to meet local needs
4. Alaska Permanent Fund Dividend: Corporate lease payments yielding £2000 plus per state resident yearly

1.
Karl Polanyn and Herman Daly: land, labour and money are ‘fictitious commodities’ – need to remove them from the market
2.
Money reform also requires land reform and corporate reform to steward and share our commonwealth
3.
Community land trusts (USA and UK) – Irvine for 10,000 homes
4.
Challenge is how to link up components for a ‘commons’ system
- 100% money and demurrage
- Mutual credit and credit unions, social banks, public banks
- JAK and Community Land Banks
- Social dividend and corporate reform
- Ecological tax innovation (Skidelsy – How Much is Enough)

1. Kicked off in December 2009 by the Huffington Post in USA – to say Yes to community banking and No to
Wall Street
2. Backed by Community Development Finance
Coalition – 10 million transferred accounts
3. Move Your Money UK launched a British campaign
– February 2012

The love of money as a possession – as distinguished from the love of money as a means to the enjoyments and the realities of life – will be recognised for what it is, a somewhat disgusting morbidity, one of those semi-criminal, semipathological propensities with one hands over with a shudder to the specialists in mental disease.
I believe that the future will learn more from the spirit of
Gesell than from that of Marx.
John Maynard Keynes