The STATE BANK and the COMMERCIAL BANKS

Money has probably been invented 2600 years ago  to reward soldiers without promises … A piece in Gold or silver had (and still has) an universal value… 

So,  money must be a guaranteed medium of exchange !!!

A STATE BANK must manage the wealth of the Nation … What could us imagine its relations with the commercial banks in our system??? 

In the concept of “Outsourced Resources Banking”, a State Bank manages a limited money supply which own  a tangible  value.

In this case, it’s easy to imagine the State Bank make loans of real value  for the commercial banks, and advise them to create a convertible local currency to fill specific needs

IN THIS SCHEME : 

- The State Bank mints coins, manages the money supply and advises the commercial banks

- The chartered commercial banks are responsible of the economic activity at the local level , by creating a convertible local currency , based on their own savings. 

- The need of cash is filled on a “project based “ economy !!! because, for most of the people,  getting assets is more useful than have money.

A banknote is a (foreign) debt

I have never understood the currencies exchanges market , because once you buy a foreign banknote , you buy a debt backed by a foreign person ….

Buy USD , it means buy debts on an US population with at least 50 millions people living with  Food stamps …. Buy Euro, it means buy a debt “””genetically ill”” … idem with GBP, JPY and many … others.

Money is not an asset …. Money is a tool !!! I have never seen a person speculate on a tool.  For foreign trades, why not create an Ad hoc currency for each situation ?? 

People have misunderstood the nature of money and lead the world on a weak and very long  bridge !

Fractional Reserve Banking is a system created for Westerners and by Westerners , for more than 200 years, useful in the industrialization process, with a massive labor class,  and in unfair exchanges with foreigners

"Outsourced Resources Banking" IF used in Afghanistan

How the money creation by credits can be effective in an unstable country , without creating inflation ?? the lack of loans forces the central bank to create more and more paper money ..

Nowadays, Afghanis (see pictures)  is backed by US Dollar, itself backed by the Saudi Oil, backed by US military forces ….. Not in stable situation is an unstable country !!!!

(Banknotes from my own collection)

How will be the situation there after the End of the Dollar Era ... soon???

President Karzai could back the Afghanis  by the massive mineral resources … like the Germans did in in the 1930’s with the Rentenmark, a currency backed by the industrial goods.

Mineral resources have a price which can be fixed comparing with a basket of currencies !!! So, the money supply created would be tangible !!!

After, why not created  provincial banks, chartered by the State with the right to create a local currency convertible in new afghanis ??? A such bank would lend its own currency at 0% to manage local projects and would be paid on the wealth created  !!!!

REFORMING THE MONETARY SYSTEM, IT MEANS REFORM THE HUMAN RELATIONS !!!

PS : don’t forget to follow our experimental banking uchronia to understand well this methodology http://www.banktoba.blogspot.fr/2013/09/the-state-and-currency.html

IMAGINE ANOTHER KIND OF BANK : UCHRONIA (Russia, 1890’s)

In the late 19th century, the Russian empire was the largest State in the World… Its currency, the ruble backed by precious metal, was probably  the strongest currency in the World. 

But, the Russian Empire had needed many  loans from foreigners … Why ??

Because Industrialization needs an almost unlimited amount of cash, and the russian financial system, based on a serious conception of the currency, was unable to cope with this problem without using some western methods and the concept of “Fractional Reserve Banking” …….

Can we imagine a Russian Empire keep a strong M0 in Copper, Silver and Gold  ??? and authorizing some weathly people or banks to create their own local currency, to fill local needs, with a chartered conversion in Gold, Silver or Copper …. Russia had enough labor force and material resources to avoid to ask foreigners money …. 

With the huge gap, between wealthy and the major part of the population in Imperial Russia, This idea could have been effective   !!!!!   The wealthy could become more wealthy and responsible, and  the peasants could get a real medium of exchange to deal efficiently with daily problems.

On a post published on 31 July 2012, I have developed the idea of a unit of account named Toba : http://outsourcedresourcesbanking.blogspot.fr/2012/07/toba-unit-of-account.html

So, I will attempt to place this idea, in the Tsarist Russia, through an experimental banking uchronia. I try to be a numismatist, a vigilant citizen and an innovative independent researcher  ….. I collect many silver rubles from this period.

I will continue to explain the system and the method on this blog, and I will be focused on the current opportunities to use it,  but I open a new blog and a twitter account for an experimental banking uchronia : www.twitter.com/banktoba   and http://banktoba.blogspot.fr/

Why the “money debt” , by credit, is NOT destroyed when paid ????

Many people think the money amount created by the credit is destroyed, once the credit is paid with interests !!! FALSE

 A bank creates, by credit, a virtual amount of money …. backed by a prospective wealth in the future !!!  and includes interests, not even created. 

The money to pay the credit is found in others’ pockets, their wealth already exists!!! and this money created as a credit, by the bank is paid as cash !!!

Another vision of the Banking System !!! (back in time in Russia)

In the late 19th century, the Russian ruble was probably  the hardest currency in the world  !!!  A monthly salary for a low level worker was around 16 rubles at this period. 

But, even with a massive quantity of natural resources  and  a large labor force available, the Imperial Russian State created  too many credits ….. in rubles !!!! Have you ever seen the 500 rubles banknote printed in 1912 ???

Imagine another way !!!!!

• The State created coinage and print paper money backed by the wealth of the Nation …. Russia had massive opportunities in natural resources.
• The State authorized commercial/private banks, which owned monetary or tangible assets to create their own private currencies , with a conversion with the coinage from the State ….  The need of cash can create social problems !!! The nature of cash is not important, if products are available using a secondary currency !!!
• Instead to create the money  by loans …. A commercial bank, using the concept of “Outsourced Resources Banking” , can  create an ad hoc currency to manage a sustainable project ….
• In this system,  the currency created  is not used to buy products, but to be exchanged in a common purpose with others  …. The necessary tools exist already in the field  !!! The currency becomes a management tool. 
• For example, Instead to loan some rubles in a disaster stricken area, ……. It could have been better to  loan some assets to back a specific currency in a multi purpose  bank !!!

This system can be effective to cope with some accurate problems …… An economy based on an unlimited consumption and unlimited production is clearly not sustainable in a limited world !!!!

TO SUM UP !!!!!

EMERGENCY FINANCIAL MANAGEMENT SYSTEM

NAME : OUTSOURCED RESOURCES BANKING

STRATEGY : KEEP AN ECONOMIC ACTIVITY AND POSITIVE SOCIAL  INTERACTIONS, WITHOUT CREDITS,  LOANS,  CASH… ( CAN BE USEFUL IN DISASTER STRICKEN AREAS TO AVOID A FORM OF PAINFUL  DEPENDENCY  BY DEBT) 

TACTICS :
- Finding some assets to back an AD HOC currency (or unit of account)
- Understand the needs, the strengths and the weaknesses … Make a hazard evaluation. Make an AD HOC  financial recovery plan
- Emitting this currency to fill the needs of cash for useful exchanges and positive interactions, based on common projects,  to make faster the Recovery period .. The wealth of the assets which back the ad hoc currency will be invested in the projects as a guarantee.

 PEOPLE REQUIRED :
-    A Financial Incident Commander (it’s important to be aware that money is the key part of the human interactions and  in many decision making process)
-    Individuals able to find assets ou to get them by loan (necessary to back the ad hoc currency)
-    Managers able to evaluate the needs, the strengths and the weaknesses .. and to make an evaluation of the future projects
-    Technicians able to mint and manage the ad hoc currency in the place concerned

The banking system have taken the wrong way ..... around 200 years ago !!! my ambition is to offer explanations and an alternate solution. 

I love History, so I am available for consulting services, but I am also working now to create an uchronia about the subject

NEVER FORGET !

•    Bank debts are others’ assets
•    Bank assets are others’ debts

It’s not a Win Win solution nowadays, because savings become rare !!! An effective management must be clear and accurate !!!

• With the current system, you get money by a LOAN from no tangible assets, or in the case of public workers , the State asks a loan to pay them….
• With the concept of “outsourced resources banking”, you get money by a PROJECT from tangible assets.  The State keeps the power to create the main currency, but the banks create some AD HOC currencies or Units of account. The banks are paid on the productivity created by useful  economical interactions in the real life ….. 

 With more and more people stricken by debts and damages; it's time to use another monetary concept !!! I am working on an uchronia from the imperial russian ruble, to imagine how the system could have worked in history ...

THE KEY MISTAKE !!!!

Go back in History !!!!

A State must be mainly responsible for Security, Law and some Infrastructures … A State receives incomes from tax and from public companies. !!!

 How a State can create a currency ??? many tribes or native people have created  some proto-moneys with their local resources ….. However, Precious metal is one of the most  universal value. So, establish a realistic weight for a currency is the first challenge….. 

Secondly, Establish a conversion between the main national currency and the private currencies that could be created by people / Banks / companies who own assets ….. In this way, there is no depreciation of the main currency.

It was a true mistake to let Banks create the same currency with only paper and credits ….. It was impossible to find enough physical  gold and silver supply to back all the money created …..   If Banks had created some different private currencies backed by tangible assets, the competition could be effective for innovation and productivity ….. 

 The main mission for this kind of  banks : increase their assets, so in this scheme, increase the State Wealth and the monetary base.

What to do now ??

 Austerity is massive in many western countries and many cuts on savings are still expected  !!!  As an emergency manager and a Geographer, I think it’s stupid to loan money in a disaster stricken area, it’s a financial slavery ….. Why not  loan only assets ??? And let people create their own ad hoc unit of account, like explained in this research blog,  to  recover as fast as possible with positive exchanges and interactions

« EQUIVALENCY »

That’s the main word in the current monetary crisis  !!! What are the good prices for Gold, oil, food, shares, currencies  ….. ???? A 500 euro banknote is NOT the same thing that  500 euros in shares ..

I think NOBODY  knows  …. All the prices are more or less tricked  !! like the nanny States ‘ promises … The financial world is a virtual world !

Therefore,  it’s important  for each of us to consider  tangible opportunities and not the national currencies !!!!    

Money is only  a medium of exchange and a temporary reserve of value.  The most important is the exchange created …. 

Money must be our servant, not the inverse !!!! For more than 100 years , it was a true mistake  to let private Banks create the same currencies than the States... , with credits. Private banks could create differents private currencies with a conversion in USD, GBP, ...... etc