What is Interest?

By Tim Jenkin

One of the fundamental differences between Talent Exchange money and conventional money (e.g. Rands) is that the former is free. That is, when you go into 'overdraft' (i.e. below zero and into the red) you are not charged interest on it. Those red figures in your statement of account represent credit that you have received from the community, not debt to anyone. You did not have to borrow anything to go into debit, you simply went there by making a purchase greater than the amount you were above zero, or from zero if you had not engaged in trade before.

Why is there no interest in the Talent Exchange? Is it because there is no 'real' money and therefore nothing can be lent or borrowed? No, when you borrow money from a bank no 'real' money is lent either. The loan from the bank is just book money and appears miraculously as a deposit in your account after a few key presses on a computer keyboard. No physical cash is moved around. Sure you can write out cheques on the deposit and get physical money from the teller but the deposit itself is just a number on a computer, much the same as the numbers in your Talent Exchange account.

How then can banks charge interest for simply typing some numbers into a computer? This is one of the mysteries that banks keep hidden from us. The money that banks 'loan' us is created out of fresh air, not lent to us from the accounts of savers. All the savers can check their balances at any point in time and they will find that their savings have not diminished because the banks have lent out their money. Banks cannot, in any case, lend out other people's money without their written permission. Every loan is the creation of new money and it is through this process that new money enters the economy. Every Rand in existence has a Rand of debt backing it and every Rand of debt has an amount of interest attached to it.

Even a six-year-old would then be puzzled to know where the interest comes from if every Rand in circulation has a Rand of debt attached to it. This is the crux of our debt-based money system: there is more debt than there is circulating money, and the money to pay the interest can only come from, you guessed it, more debt. This holy cycle is what drives our economy forward in an ever increasing spiral of money and debt creation. Stop this process and you have a disastrous depression. Keep it going and you have an even more disastrous outcome in the form of increased indebtedness, resource depletion, environmental destruction and ultimately the complete collapse of 'civilisation' as we know it. A money system based entirely on debt is a very shaky foundation indeed for an economy and human society in general.

So accustomed have we become to believing that if we want credit we have to go to a financial institution to borrow it that we forget that credit is not something that can be given to us by a third party outside the loop of buyers and sellers. Credit is getting something from the community (e.g. the assistance of bricklayers, plumbers, electricians, carpenters if we want to build a house) before we have delivered anything of like value back to the community. That is real credit, not some numbers on a computer. The Talent Exchange recognises this fact and that is why it allows you to go into debit (i.e. receive credit from the community) without having delivered anything of value. Your debit represents your commitment to the community, not something you owe to the Talent Exchange 'bank'. The Talent Exchange does not punish you for being in debit by charging interest on that debit, for that debit has nothing to do with the Talent Exchange 'bank'. As the credit comes from the community it would be theft on the part of the CES Administration to demand interest from you, just as it is theft on the part of conventional banks to demand interest from you for creating money out of fresh air with which you obtain credit from the community.

In any case, no one needs to borrow money in the Talent Exchange because they can simply go into debit. Anyone wanting to charge a fee for 'lending' Talents (interest) would be wasting their time for there would be no takers.

From Community Exchange News, No.21, 9 May 2005

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