Surviving Money and the Financial System
This session was an audio-visual presentation/talk/Q&A on how money and financial systems operate and impact on women of limited means; how the system serves economic purpose, but also deceives and impoverishes through abuse. It interactively provided what women need to know and do to counter the system and survive. Three videos and a summary shared by Najma Sadeque of the issues raised in the economic toolbox session “Surviving Money and the Financial System” at the 2012 AWID Forum are included below.
Speakers: Najma Sadeque and Deneb Sumbul (Shirkat Gah)
Surviving Financial Systems
Money and banking are double-edged swords.
How do they help — or hinder — you ?
It would be a difficult world without money and banking services. All the incredible strides and achievements would have taken much, much longer, if at all. This is because almost every activity in the world involves some kind of cost, whether for energy or materials or services rendered. They have to be paid for, whether directly or indirectly.
In other words, money as a medium of exchange to overcome the limitations of barter, and banking services to simultaneously handle hundreds of thousands of simple and complex exchanges between countless people and organizations over time as well as distance, are absolutely indispensable.
Since money is supposed to facilitate fair exchange, people think it is a neutral item and should be left alone. But money is no more neutral than the people who invented it or use it. People are not always fair, least of all speculators, and there are possibly as many dishonest or amoral people in the world as there are honest and ethical ones. Not for nothing have major religions also advised that transactions and contracts be documented and witnessed. In many parts of the world, women never receive or get to handle money. And without economic and financial empowerment, women can never be fully empowered.
Most people make the mistake of pursuing money as wealth and an end in itself instead of what it can buy that is worthwhile. But purchasing power can be transitory or illusory. Imagine having millions in the bank, and suddenly the currency is demonetized, or completely loses its value in relation to a stronger, foreign one. Overnight, one is rendered ‘penniless’.
As far as you and I and the vast majority of the world’s people especially women are concerned, we need to be sure that we get fair value in money form for the goods or services we offer. — And conversely, fair value in goods and services in exchange for our money. One need not be a highly-trained expert to understand how money and banking work; anyone can comprehend the basic principles. In the following video, you will find that the system is based on both common sense and innovations that serve your purpose, as well as that of the banks, the latter perhaps more so.
It would be clear to you by now that unless made of gold or silver or other metal of some value, money – paper or electronic — has no intrinsic value of its own. It is just a measure, a unit representing some value. – So that you can quickly determine how much of it you need to spend or charge or save.
People don’t accord the same value to money all the time. So prices can shoot up and down. Some countries accord higher value to their own currencies but an unfairly low one to other countries.
What must be understood is that in the process of making legitimate charges for services rendered to customers, some of the world’s biggest banks took advantage of public ignorance of how the banking system works, and began to gamble with customers’ money. This was possible because the banking system worldwide has a built-in flaw in it that happens to be its main strength – although some would call it deceit, as it can be corrected or managed within limits.
Banks are allowed to create their own additional money in the form of numbers in ledgers up to a certain amount. This is known as the ‘fractional reserve’, which means leaving a certain fraction of deposits on hand in case customers suddenly all want their money back at the same time, and to avoid a run. Prudent banks generally retained between one- third and half of their deposits as reserves. This was part of the reason that banks in the developing world escaped the worst abuses of the system, unlike American banks that were almost completely deregulated and not subjected to any checks and balances. It enabled these big banks to gamble with customers savings without the latter becoming any wiser – until it was too late.
Until this fatal flaw and other undue liberties of the banking system are exposed and reined in, the world will not be able to become a more equal and just one even if everyone has a decent job, and there is little corruption, and economies are stable. This is because, the biggest international banks wield excessive power over the financial system, the misuse of which can and have undermined and ruined entire countries and economies.
It is bad enough that banks are allowed to be secretive about their activities and are not required to inform customers about the implications and consequences of operations involving customer assets. Over the last three decades, major American banks have lobbied with political representatives and used their financial strength to push through maximum deregulation of their activities, so that there is virtually no monitoring or oversight, let alone accountability and penalization.
Every economic activity is a two-way or multi-directional traffic that should benefit all parties. Even commercial transactions have to serve a social purpose while making a profit since all economic activities use natural resources and public goods which ultimately belong collectively to all people. Manufacturers and sellers of goods and services are not the only ones that provide a service. The buyers return benefit as well, because without a market and no one to sell to, there would be no business, manufacture, trade, retailing or earnings.
Like any other business, banks are entitled to charge for services without which people would not be able to manage their daily affairs. But this does not give them leave to impose excessive and compound interest when they are not producing anything productive in any way whatsoever. Historically, usury has always been frowned on. And banks are certainly not entitled to gamble with customers’ money to make extra unwarranted profits, that too without customers’ permission or knowledge.
Money, banks and trade are so interlinked around the world, it is like a group of mountaineers who are linked to each other by rope; when one falls, it is just as likely he will fall and pull the others down with him instead of being able to be pulled back up by the others. The crash of 2008 therefore also affected to some extent the South countries which otherwise do not use the risky financial instruments that big US banks indulged in.
This is why every country should have its own domestic currency that is not linked in any way to any foreign or international reserve currency, nor be convertible into them. Foreign exchange is not needed for economic activities that involve only local raw materials, goods and services. When governments use foreign exchange for such purposes, they are needlessly wasting money and getting themselves into debt, for which they have to earn the foreign exchange through exports or other services to repay with. Foreign exchange is needed only when some goods or expertise are not produced in one’s country and have to be obtained from outside; not otherwise.
Central bankers of all countries must discover or rediscover that they can safely and beneficially create their own domestic currency for internal use. This would also help the masses who tend to be marginalised when economic earnings are dependant on foreign trade earnings brought in only by big companies.
The central bank can judiciously create all the domestic currency that is necessary and practically possible to stimulate economic activity, carry out public works and maintenance, thereby creating useful employment.
A very fundamental problem is that money is not linked to human rights, and this is what activists need to address in today’s world where every resource, including those essential to human survival, are being subjected to commercialization, privatization and monopoly ownership, depriving the majority of their share of resources, and therefore their fundamental rights.
Surprisingly, money is also not created in ratio to the quantum of natural resources that actually exist. Because money is delinked from resources that are actually available, limited resources go only to those who have enough purchasing power. Consequently, the poor get little or nothing. And the system is rigged in favour of the ‘haves’.
As such, in our finite world with a mushrooming population, no Public Good (such as roads, utilities, water and sanitation, public transportation,) should be awarded to any foreign investor. — Nor should agricultural land or other natural resource, public or private.
Both domestic currency and public banks are necessary in the public interest, especially in South countries that continue to be exploited by foreign investment and odious debt.
Every country and every province or sub-region within each country should have state-owned public banks mandated to serve the local citizens and enterprise strictly within the assigned geographical area. Profits are a secondary focus since public banks are not beholden to private shareholders, and can therefore afford to make less profit and not burden customers with high interest rates.
These public banks need to not only invest in Public Goods (such as utilities) that are state-run, but also to make available easy and long-term credit to all small and medium enterprises, and moderate and low-income people. This is the only way to achieve a fairer deal for all with the least extremes of wealth and poverty.
The finest examples of such banks are the Landesbanks in Germany, the WIR banks in Switzerland, and the solitary Bank of North Dakota in the US. This is the only way that wealth can be justly redistributed so that everyone receives a fair share and has the opportunity to fulfil his or her potential.
If you belong to a developing country that’s chronically in debt or often hard up for money, you need to understand why. You need to ask: are the loans your government are taking from the World Bank and IMF or other lender, really necessary? How much of the objectives can be achieved locally with domestic currency?
If you belong to a lower income-bracket to which private banks don’t extend credit, your government should be stepping in to fill the gap. If it is not, it’s time to turn activist and demand it.
In the meantime, if your country or community is going through a financial crisis, and money for personal or small business loans especially are not forthcoming, it is worth organizing with other people to use alternatives such as barter and barter-come-money and other systems described in the videos. People have resorted to such alternatives all over the world.
If you are to take back your world from big international banks, speculators, multinational corporations and political manipulators, you have to demand and fight for these rights until they are made part of your country’s constitution and the law.
You have a right to your share of natural resources that have been endowed by nature and are not man-made, and to invest them or their equal worth in money to run your own profitable enterprise. Banking systems especially in South countries, tend to be male-dominated. They are not always sensitive to women’s special needs and localised problems. More women are needed to build complementary currencies to build up marginalized women and communities.
Finally it must be remembered that a bank is only as good as the rules it is regulated by and its transparency. If they conduct themselves with secrecy, and are not monitored, there is something to be suspicious about. It was the lack of regulation and transparency that enabled banks to get away with unfair dealings that customers were in the dark about, that led to the financial crash of 2008, which impact continues to be felt today.
Customer awareness is an absolute must. If you fall afoul of the money and banking system because you consciously avoid trying to understand it, you will have only yourself to blame for it.
Be informed, and assert your rights to your share of the common wealth. It is in women’s interest to be knowledgeable about money and banking instead of being easy prey. You need your share of the pie for your survival and fulfilment. It is a matter of right.
To learn more and to obtain FINANCIAL TERRORISM, by The Green Economics Initiative, Shirkat Gah, write to firstname.lastname@example.org