To deal with climate change we need a new financial system #auspol

By Jason Hickel

Abolishing debt-based currency isn’t a new idea, but it could hold the secret to ending our economies’ environmentally damaging addiction to growth.



That means we have to double the size of the economy every 20 years, just to stay afloat. It doesn’t take much to realise that this imperative for exponential growth makes little sense given the limits of our finite planet.
Rapid climate change is the most obvious symptom of this contradiction, but we’re also seeing it in the form of deforestation, desertification and mass extinction, with species dying at an alarming rate as our consumption of the natural world causes their habitats to collapse. 

It was unthinkable to say this even 10 years ago, but today, as we become increasingly aware of these crises, it seems all too clear: our economic system is incompatible with life on this planet.


But replacing GDP is only a first step. 




So where does all that additional money come from? Banks create it out of thin air when they make loans – they loan it into existence. This accounts for about 90% of the money circulating in our economy right now. It’s not created by the government, as most people assume: it is created by commercial banks in the form of loans. In other words, almost every dollar that passes through our hands represents somebody’s debt. And every dollar of debt has to be paid back with interest. Because our money system is based on debt, it has a growth imperative baked into it. In other words, our money system is heating up the planet.



The responsibility for money creation would be placed with an independent agency that – unlike our banks – would be democratic, accountable, and transparent, so money would become a truly public good. Commercial banks would still be able to lend money at interest, but they would have to back it dollar for dollar with their own reserves. In other words, there would be a 100% reserve requirement.


The idea has its enemies, of course. If we shift to a positive money system, big banks will no longer have the power to literally make money out of nothing and the rich will no longer reap millions from asset bubbles. Unsurprisingly, neither of these groups would be pleased by this prospect. But if we want to build a fairer, more ecologically sound economy, that’s a battle that we can’t be afraid to fight.

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