People live in a community close to an iron orebody. Exploiting it will cost 100 million euros. No one in the community has that kind of money. The wealthiest man in the comunnity has 2 million euros, and he can scrape together a total 15 million from interested risk-takers.
Thankfully, people in the community deposit their savings in the bank, and the friendly banker is interested in being the intermediate between the public and the new mining business. So he takes their savings, lends them to the new company, which builds a mine. The banker gets net interest, the public jobs and interest on their accounts, and the investor get profits.
None of this new wealth had been possible without the finacial services provided by the friendly banker. Peak oil is not an energy crisis. It is a liquid fuel crisis.
Oh, wait ...
The community doesn't see a penny - although they may be left with an interesting eyesore and mass unemployment when the mining is 'no longer economic.'
Where is this paradise where 'friendly bankers' interact with 'a community'?
It may happen in isolated instances, but it's hardly the norm, is it?
Or uh, where would these 85 million come from, if the company only has 15? Peak oil is not an energy crisis. It is a liquid fuel crisis.
And why would the initial investors want to cede control of their company to the construction company? Peak oil is not an energy crisis. It is a liquid fuel crisis.
But suppose that the construction company doesn't have any other business opportunities because there's a depression. Here you have: an idle construction company, idle prospective miners, a community with an idle iron ore, and investors with 15% of the cash necessary to mobilize all these resources.
Money is very useful, and fiat money more so, in greasing economic activity. But in situations where resources are idle because of lack of money you have to monetize the resources internally to a partnership in order to make things happen. If the construction company wants to become a partner, the project happens. If they don't, it doesn't. If they don't have other projects available, they lie idle, too.
As Minsky put it, anyone can create money, the problem is to have it accepted as such. Partnership arrangements are ways to turn assets into money acceptable to the partners. If you bring enough of the community into the partnership you may even be able to feed everyone. Otherwise they can all line up at the employment office and the soup kitchen. En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
The purpose of Kjell Holmstrands Klöver [Clover, the name of his currency] is that the money should stay in the local area. He means the capital should stay in Orsa [where he lives] and not end up somewhere else. That's why he also opposes the Euro.
- We shall keep our money in our own country, he says. The Euro means we'll have to send even more money to the bureaucrats in Frankfurt/Brussels. Then we'll have to stand there with the cap in our hand and bow and beg, so the merciful gentlemen will give us back some of our own money. Peak oil is not an energy crisis. It is a liquid fuel crisis.
We're talking about depression economics here: the problem of mobilizing sufficient, willing local resources when there isn't enough money locally and no access to credit from the broader economy. En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
Does anyone have any hard evidence about the actual number of community-profit projects, as opposed to the usual rape-and-pillage finance?
I can think of one - and the bank involved is very unusual, with a rare record of community interest.
If you want to prove there are more than isolated counter-examples, show me evidence of systemic banking generosity and community engagement.
It's a bit of a bonkers argument to be making at a time when communities and individuals are struggling but the banks aren't lending - and the banks and the FT are saying so.
Adam Smith said it better: "It is not from the benevolence of the butcher, the brewer, or the baker, that we can expect our dinner, but from their regard to their own interest." Peak oil is not an energy crisis. It is a liquid fuel crisis.
Big industry requires big finance and big finance changes the economic game away from Smith's marketplace of petty merchants, tradesmen and farmers. En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
Smiths principle is still valid though, but I fear this simple thought experiment by now has been wrung dry of its use. :) Peak oil is not an energy crisis. It is a liquid fuel crisis.
Smiths principle is still valid though
[the general equilibrium theory of Neoclassical Economics] means that, for those subsystems of the economy where conditions are apt, the market can be relied upon, particularly if the market is not relied upon for the overall stability of the economy the determination of the pace and even the direction of investment income distribution and 4) the determination of prices and outputs in those sectors that use large amounts of capital assets per unit of input or per worker
And the other point was that mobilizing resources increases wealth. That's why people are willing to mobilize resources today for a benefit tomorrow.
That finance can be predatory is not under dispute either. En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
Everyone I know who's a farmer or manage forest and need capital to do that. Not to mention the iron mine north of the city they'll rehabilitate for about 100 million euros... Peak oil is not an energy crisis. It is a liquid fuel crisis.
Nice if you can find it.
People live in a community close to an iron orebody. Exploiting it will cost 100 million euros.
If they are willing and able to contribute the work in kind, you can do this. En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
But I see no reason why they would accept payment in shares. They have bills to pay, and these bills cannot be payed with mining company shares, but only with cash. Peak oil is not an energy crisis. It is a liquid fuel crisis.
If everyone demands hard cash and there is no banker around, the project doesn't get going. You mentioned a "community" being involved in this. Presumably the "community" has a local economy that provide some of the services these contractors would use their cash for, again in kind or by accepting the scrip issued by the mining partnership as a local currency. And once we're talking about it in these terms, what fraction of the community's GDP is 100 million, in your example? En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
Presumably the "community" has a local economy that provide some of the services these contractors would use their cash for, again in kind or by accepting the scrip issued by the mining partnership as a local currency. Some, but certainly not all.
And once we're talking about it in these terms, what fraction of the community's GDP is 100 million, in your example? What do you think? A city of 30-35.000 maybe, so a GDP around 1 billion euros? Peak oil is not an energy crisis. It is a liquid fuel crisis.
Why cannot the share circle be widened to include these suppliers?
The problem is the assumption that everyone is a delocalised service provider who wants hard cash so they can bugger off. En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
Second, because this would tie up everyones capital (like a forced investment in some global index fund) and stop people from buying that TV, car, vacation or investing in their own small business.
To resolve these problems and ease transactions, the state decided to launch a universal scrip: the currency. Peak oil is not an energy crisis. It is a liquid fuel crisis.
So in your example, the "community" charters a corporation and gives it the power to issue 85 thosand worth of scrip to fund the construction of the mine. En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
And how should this community empower a corporation like that? Only the state has that legal authority, or the scrips will not be legal tender. Peak oil is not an energy crisis. It is a liquid fuel crisis.
Then again, it need not work. But it has happened here and there in the course of history. En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
Peak oil is not an energy crisis. It is a liquid fuel crisis.
I'm finding the notion fanciful that this stakeholder can advance 85% of the investment "in kind" (in a local community example where there's only 15% of the investment to be found in cash).
Meanwhile, in the real world - the bankers come in, strip mine the wealth, and it gets sucked into an offshore account in the Cayman Islands, where it's turned into drugs. The community doesn't see a penny - although they may be left with an interesting eyesore and mass unemployment when the mining is 'no longer economic.'
